IRVING, Texas—The way company president Mike Deitemeyer sees it, the financial crisis during the past few years might actually benefit Omni Hotels & Resorts in the long run.
As a long-term holder of real estate that relies on its own balance sheet to buy assets and grow the portfolio, Omni often finds itself in bidding wars with hotel companies prepared to over-leverage and overspend.
When debt became harder to obtain, many buyers were weeded out. In came Omni, a well-capitalized upper-upscale hotel company that owns and manages 39 of its 47 hotels in the United States, Canada and Mexico. In September, the company used the power of its balance sheet to acquire the Amelia Island Plantation just north of Jacksonville, Florida, in an all-cash auction bid for US$67.1 million. Most recently, Omni reached a development agreement to build an 800-room convention center hotel with more than 80,000 square feet of meeting and event space in downtown Nashville, Tennessee. That project is expected to be complete in 2013.
“We’ve always been well-capitalized, but never really achieved substantial growth objectives because we were competing with people who are (internal rate of return) driven,” Deitemeyer said. “Now they have less debt to put on a project and that has put us in a position at an auction to acquire projects.”
|Mike Deitemeyer, president, Omni Hotels & Resorts
Financial structure aside, Deitemeyer said Omni positioned itself as a hotel company rather than a real-estate investor. Instead of looking a quarter or 12 months out, Omni manages its business for the long term.
“Across the board, I think the hospitality business at times was run from more of an opportunist real-estate flip rather than long-term for the purpose of running a hotel,” Deitemeyer said.
Although part of Omni’s growth strategy is centered on scooping up distressed assets with little or no outside financing, the Amelia Island resort hotel was somewhat of an anomaly. Omni’s portfolio is mostly filled with urban locations in key business gateway cities. Deitemeyer said the strong customer base in those markets will help build awareness for future resort demand.
“Recently, we’ve spent more time looking at resorts, such as the Omni Bedford Springs Resort in Pennsylvania. We’ve went after unique, different properties,” Deitemeyer said. “The Amelia Island project has amazing brand recognition, a level of awareness and uniqueness.”
Omni plans to invest another US$150 million into the property, possibly expanding the existing retail village and adding 125 rooms and a central ballroom.
But urban locations will remain Omni’s bread and butter. Deitemeyer said a U.S. city can’t discuss potential convention center operators without at least throwing Omni into the mix. The company is in talks surrounding development of convention center hotels in Pittsburgh, Pennsylvania, and Boston. They recently topped off construction in Dallas and are ahead of schedule on that property with a potential opening date of 11 November 2011. Omni has inked a deal with the National Football League and during the upcoming Superbowl, Deitemeyer said the team representing the AFC will stay in Omni’s Las Colinas, Texas, property and the team representing the NFC will stay in Omni’s Fort Worth, Texas, property.
The Omni Nashville Hotel will sit across from a 1.2-million-square-foot Music City Center currently under construction and scheduled for completion in 2013. Nashville’s Metropolitan Development and Housing Authority had originally picked Marriott Marquis as the hotel’s flag, but when that deal didn’t close, Omni swooped in.
Deitemeyer said he believes Nashville is an underserved market going through a major expansion.
“Nashville is a pretty unique city,” he said. “The Gaylord is not exactly the convention center hotel that city needs. Last year, when we heard the Marriott deal fell through, we entered that dialogue and, as we spent more time in that city, we realized the opportunity for a meeting venue.
There are some things we’re working with the new music city center and our hotel—the way they’re going to be woven together—you may see something in Vegas that has all the amenities, but outside of that, I truly believe this is a one-of-a-kind opportunity.”
The company also is freshening its current portfolio with renovations. As the hospitality industry experiences rising fundamentals, Omni is positioning itself to capture a fair share of revenue.
“Certainly you can debate how quickly the recovery is going to happen. The reality is, if you go in forecast mode, the next five years are going to be pretty good,” Deitemeyer said. “For us it’s more of that long-term focus. We work hard to decommoditize; from our perspective we’re trying to drive an experience that’s unique.”
Omni is analyzing social media and the way travelers book hotel rooms. Deitemeyer said he recognizes the transition from when travelers’ decisions were influenced by AAA, then by the brand, and now by sites like TripAdvisor and Expedia. Omni’s job, he said, is to create an experience through service, not through capital. Simple tasks like monitoring TripAdvisor and reviewing hotel rankings help. In addition, the company offers free WiFi throughout its portfolio and delivers coffee and the newspaper of the guest’s choice.
“It’s a value equation for us,” Deitemeyer said. “It’s a service and it’s about being unique and different in our space. We understand what a customer is looking for.”
In addition, the company announced a new brand of hotels in February called Mokara that would be anchored by a hotel spa. Rather than develop new hotels, Omni decided to rebrand existing hotels, starting with the Watermark Hotel & Spa in San Antonio, Texas, which is now open.
“It’s certainly a high-touch, five-star service, spa-oriented experience,” Deitemeyer said. “We currently own a bunch of land in Mexico on the Bay of Vanderas. One of the plans in that location is to do a full-service resort where we will have both an Omni and a Mokara to cater to different guests’ needs. The question is when do we step forward with that. But, in the end, we see more opportunity to do more resorts.”