LBA Hospitality: Development helps deliver management

DOTHAN, AL—Strictly a third-party management company for almost 10 years, LBA Hospitality has been strategically expanding its portfolio by amping up its development activity and subsequently managing the results, largely for well-known asset owner, Apple Hospitality REIT, to which LBA sold its owned portfolio in 2007.

Led since 2012 by President Beau Benton, the company’s former CFO and COO, and with Barry Kraselsky, LBA’s past president, wrangling development deals, the organization at press time has 59 management contracts under its watch.

“It’s a little bit of a moving target,” said Benton. “We have owners we manage for that sold two hotels over the past two weeks and then we have a number of management contracts—about five are in place—on projects that will open but are not operating properties at this time.”

Like some of his management company peers, Benton is taking a “measured approach” when it comes to advancing LBA. “It’s not exactly conservative but not as aggressive as some similar companies. From a third-party management standpoint, it’s about relationships and not just going out and soliciting management agreements from anybody that owns a hotel, but rather being a little bit measured… and making sure our goals and objectives are aligned with that of the owner,” he said.

“We’re really not out there actively soliciting one-off management contracts, but that’s not to say we wouldn’t take some that have potential for multi-units down the line,” said Kraselsky.

Benton acknowledged the industry’s robustness over the past several years has served owners well, giving them the ability to put “a lot of money” back into their hotels. “I can’t remember a time during my past 11 years [with LBA]that we’ve had a portfolio that says ‘new’ from a standpoint of renovation as it is right now; owners were able to deploy that capital back into the properties. From a management-company standpoint, we were able to invest in resources, especially in the areas of e-commerce and technology, to be able to change our focus, kind of from rearview mirror to being more proactive and looking forward in managing the hotels,” he said.

LBA added four contracts in 2015, including a Holiday Inn in the historic district in Savannah, GA.

“To get into that type of market with a full-service [hotel]was something a little bit different for us. It was our first time back with an IHG property. The company kind of cut its teeth in the ’70s and ’80s with Holiday Inn, but we kind of got away from [those]. One of our other new agreements for a property that will open is for a Holiday Inn Express. So, we’re also expanding a little bit on the brands,” said Benton.

Previously, the company had a Holiday Inn here since 1972 owned by Larry Blumberg, founder, president and CEO of Larry Blumberg & Associates, aka LBA. The exterior-corridor hotel was reflagged on Jan. 1, 2011.

On the development side, Kraselsky said all of LBA’s new projects are focused on the type of hotels Apple Hospitality REIT would like to add to its portfolio.

“What they’re looking for are larger markets, larger hotels with multiple demand generators. So, in the past, where we were developing in smaller, tertiary markets, now we’re developing more-specialized hotels in large markets,” said Kraselsky. 

For example, this month LBA will open a 153-suite Homewood Suites
by Hilton in Cape Canaveral, FL, making it the closest hotel to date to Port Canaveral.

“Cape Canaveral has been a consistently strong market, but till we really got focused on it we were thinking it was one dimensional from the cruise port [perspective]but it’s really a very diverse market and one that fits the bill for what we’re looking for,” said Kraselsky.

The executive added team member Ross Dorough is “constantly traveling and looking for opportunities, whether it’s an emerging market or an existing market that [is growing]and needs additional product to support that growth.”

Kraselsky noted LBA Hospitality also plans to get under way in September with a Home2 Suites at Florida’s Orlando Airport. LBA actually was the first-to-market with that brand when it was introduced.

Other properties under development for Apple Hospitality REIT include a 124-room Courtyard by Marriott in the historic Stockyard District of Ft. Worth, TX, and a campused project that will tandem a 104-room Hilton Garden Inn with a 106-unit Home2 Suites in the Riverside district of Downtown Birmingham, AL.

According to Kraselsky, the project will encompass a city block, making it LBA’s largest venture to date. Completion is slated for 2017.

LBA also recently retained its contract to manage the 112-room Hampton Inn New Smyrna Beach, which opened in February in Florida after being sold to Miami-based Key International, which also has the Savannah Historic District Holiday Inn. 

Benton noted LBA also third-party manages for Augusta, GA-based Southeastern Development Associates (formerly Blanchard and Calhoun Commercial). “They’re primarily a multi-family and multi-use retail developer and when they decided to get into the hotel space, they knew they didn’t want to be the day-to-day management company. So, we built a relationship where they do their own development. We’ve got three signed agreements in place right now for a Hampton Inn in North Carolina, a Residence Inn they’re breaking ground on near Universal Studios in Orlando, then also a Residence Inn they’ll be starting soon in Hilton Head. They’ll also be breaking ground soon on a Residence Inn in Somerville, South Carolina,” said Benton.

Benton noted LBA has been looking at some of the newer brands as well, including Hyatt House and Tru by Hilton, as potential opportunities for third-party management.

“And I think AC Hotels by Marriott would be very attractive to us,” said Kraselsky. “And today, as opposed to the years past, we are open to anything that we feel fits within our wheelhouse, regardless of the brand…It creates further opportunities for our people to grow and for us to grow as a company.”

As far as owners’ expectations, Benton observed they differ from what institutions expect as opposed to traditional owners. “With institutions their focus is to make sure that just because times are good that we’re not just a product of our environment. [It becomes] are we doing good because we’re doing the right things and could we do better. [They are] helping work with us—more of almost a partnership relationship—to see where we can continue to raise the bar and push the team to perform even better in these good markets. That focus is really when you’re looking on the revenue side to make sure you’re continuing to grow your share of the pie that’s out there,” said Benton. “And also making sure you don’t lose all of this new-found revenue that you have on the top line; that you’re still continuing to be diligent in controlling costs to get as much as possible to flow through as cash.”

Being proactive in advance of the expected downturn also is top of mind. 

“I think we are better positioned because so many assets have been renovated during this cycle recently,” said Benton. “We went into the last down cycle with some product that was already starting to age a little bit from a renovation standpoint and then during the downturn we really had to stretch it even further. I think if we do see a downturn, we’ve got better product going into it.”

“From a management perspective the goal remains the same regardless of the market conditions,” said Kraselsky. “It’s really more of a continuous mind set. Just because times are good you don’t take your eyes off of what [needs to be done]. You’ve got to constantly manage like there’s a new hotel opening across the street.”