CHICAGO—John Rutledge likes the flexibility that independent hotels offer so much that he has used them as the foundation of Oxford Hotels & Resorts.
Chicago-based Oxford, a wholly owned affiliate of Oxford Capital, is building a collection of hospitality brands that includes hotels and unique food-and-beverage venues, Rutledge said. Its Essex Inn, Julian, LondonHouse, The Godfrey, Felix, Bay Harbor and Cass properties form the core of its hotel portfolio.
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John Rutledge, |
The company likes the “more open field running” that an independent allows, he said.
“We have no restrictions, whether it’s brand standards or limitations on rates that we can charge within a brand family at a given time,” he said. “So being independent allows us to be even more entrepreneurial around revenue management, social media, operational efficiencies—all of those things. That really appeals to us as entrepreneurial people and entrepreneurial firm.”
Most of the hotels are single entities, although there are two Godfrey properties open with more in the works and there’s another Essex property in development. Regardless of the property count, Rutledge said the company’s approach is to treat them all as potential growth vehicles.
“I consider even one as a brand of one,” he said. “Godfrey is the one that we’ve been breaking out more aggressively recently. We opened the flagship Godfrey Chicago, then we opened the Godfrey Boston. We’re now under construction on the Godfrey Hollywood, and we’re getting ready to announce a fourth Godfrey, down in Florida.”
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The Godfrey Chicago was the first of what is becoming a growing portfolio of Godfrey properties for Oxford Capital. (Photo Oxford Hotels & Resorts) |
Oxford typically incubates its hotel concepts in its home market of Chicago then selectively takes them on the road, Rutledge said. The current lineup of properties generally fall in the three- or four-star category.
“They’re sliced and diced pretty thinly,” he said. “There’s not going to be a dramatic difference between a LondonHouse and a Julian.”
Even with a fine line between the offerings, expansion of multiple hotels into one city is a distinct possibility, Rutledge said.
“I could see markets where we do a Godfrey and then we do a LondonHouse,” he said. “We will do them where we think it makes sense—where we can value optimize the real estate. And if we think value optimizing the real estate in the given submarket is to put a LondonHouse here and then a Godfrey here, then that’s what we’ll do.”
Growing demand for independents
The reason for Oxford’s love affair with independent hotels is simple: customer demand.
“A growing percentage of the traveling public, whether it’s business travel or leisure travel, wants something more unique, more individualized, more of the bespoke and less cookie cutter, less conventional, less vanilla,” Rutledge said. “The internet has democratized access to the global distribution systems that the former chain used to have, really, an oligopoly on the global distribution systems. That allows an independent to compete more effectively against the big chains.”
Rutledge said the equalization is more prevalent in deeper urban markets that have a lot of latent demand. That tends to attract the attention of financiers.
“A growing percentage of lenders are comfortable financing it, and customers are comfortable and/or prefer staying in independent hotels in many cases,” he said. “With that said, the chains—and I consider the chains being the real big gorillas—the one advantage they still have is that they have the frequent guest program. The power of Marriott Rewards or Hilton Honors—that’s a meaningful element. But you pay for it, you pay big fees to access that.”
The challenge for independents is facing the mega frequent-guest programs of the big branded companies, Rutledge said.
“Those frequent traveler programs are real,” he said. “They are powerful. And the road warriors want to get their points. The challenge for a pure play independent versus a soft-brand affiliation is that you can’t offer those same amounts of points where people want to accumulate their Hilton Honors or their Marriott Rewards. And I would also say that, at the end of the day, lenders—while there are a growing percentage of lenders that are comfortable during pure play independence—generally view having a big chain affiliation being an incrementally positive thing of de-risking the transaction.”
Challenges on the labor front
Rutledge said one of the biggest challenges for all hotels is hiring a great team and then keeping that team functioning at a very high level and producing at a high level.
“Things change, dynamics change. How do you keep the hunger?” he said. “How do you keep the collaborative attitude? How do you keep the productivity level … the hungriness … how do you prevent complacency from setting in?”
Another challenge is accomplishing that in the context of new supply that comes into a given market.
“In other words, by definition, you’ve got whole new hungry teams coming in and competing for that same Super Bowl or whatever,” he said.
Independent hotels must create a distinctive work environment that allows for creativity and advancement, Rutledge said.
“We try our best to have a really collaborative culture, a very diverse culture and a culture of meritocracy,” he said. “I want to have high-quality varsity players on our team. If you are a hard worker and you are a constructive team member, the sky’s the limit.”
Oxford attempts to pair that collaborative culture with high expectations, Rutledge said.
“We try to be very transparent about what the goals are and how people can reach those goals,” he said.
With the advent of soft brands from the big branding companies looking for a way to capitalize on the consumer demand for unique experiences, it’s not always easy to determine what style is best for every hotel, Rutledge said. The bottom line: Do your homework.
“Every asset that we develop or buy, we come at it with an open architecture frame of mind, which is we’re going to look at the independent analysis, we’re going to look at the soft brand analysis and we’re going to look at the hard brand analysis,” he said. “But I would say most of our stuff is either pure play independent or soft branded, where you get a little bit of the best of both worlds.”