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Soft Brands a Key Expansion Strategy for Independent Hotel Operator Charlestowne


Jun 16, 2023
Kyle Hughey, CEO of independent hotel operator Charlestowne Hotels, said he's seen success partnering with brands on soft-branded hotels such as The Memphian Hotel in Memphis, Tennessee, which is part of Marriott International's Tribute Portfolio. (Charlestowne Hotels)

Independent hotel operator Charlestowne Hotels prides itself on organic growth, and CEO Kyle Hughey said there’s been quality opportunities in the past 24 months to acquire management contracts.

The hotel management contracts that are available now look a little bit different than in past years, he said.

“We think we’re the leader in [managing] independent hotels under 200 keys. I think there’s not a lot of people that do it to our level; we think we’ve got a good lane there,” he said. “Over the last year, mergers and acquisitions have really dominated the management space. What happens is, you have these larger companies that aren’t really as agile to deliver in the way an owner wants their vision to be delivered on.”

When a management company is either acquired or acquires a company, it takes resources away from the hotels, owners and guests, and a lot of times that owner can get frustrated, Hughey said.

“We had some opportunities come our way [because] of the frustration. [Some owners] don’t want to be mixed in a merger that doesn’t really benefit them,” he said.

Hughey said there isn’t appetite for Charlestowne to acquire or merge with another management company.

“We’re really happy with what we’ve been able to do and how we’re able to lever for our owners. We want each one of them to feel special. If you become too big, your owner doesn’t get the focus they need,” he added. “What I’ve seen [is] they kind of feel like they get pushed to the side.”

Hotels that Charlestowne has added to its management portfolio in the past year include Hotel Marcel in New Haven, Connecticut, under Hilton’s Tapestry Collection; The Memphian in Memphis, Tennessee, under Marriott International’s Tribute Portfolio; The Darling in Visalia, California; and The Inn at Aspen in Aspen, Colorado.

He said he hopes that Hotel Marcel will soon achieve its net-zero certification.

“That’s a property that we can learn from and layer into our other properties as owners make [sustainability] a focus,” he added.

Hughey said his short-term focus is on deals with soft brands under Hilton, Marriott and IHG Hotels & Resorts as it seeks to emulate its success with Hotel Marcel and The Memphian. He said those three brands have healthy pipelines of Charlestowne’s soft-branded hotels.

“The short term is to really expand that soft-brand presence, utilize our skills and the brand to execute [successful management] and open [hotels],” he said.

Charlestowne is also expanding its presence in the West and Midwest regions of the U.S. This summer, the company is opening Hotel Verdant in Racine, Wisconsin, and has an opportunity to take over a hotel in the Midwest.

To sustain the company’s organic and thoughtful growth strategy, Charlestowne recently realigned by adding new leadership positions to its corporate office.

“We’ve layered in the right team members into that [vice president] role, and now it’s really just [focusing] on getting their duties and responsibilities within that leadership role dialed in, and then maximizing their impact on the properties and the company as a whole,” he said. “What it does is it just shows we’re promoting upward mobility within our company for our personnel. And we’ve got some very complex assets and a diverse ownership; it takes a lot more resources to really deliver for those.”

He feels the realigned corporate team will be in a fully stable position by 2024.

Worries of a recession are top of mind for Hughey and his team. To alleviate those concerns, Charlestowne is “pulling every lever we can to keep revenues high,” he said.

This includes maximizing marketing efforts and promoting collaboration between finance and operations to control costs.

“We’re looking at contracts, services and labor on the expense side to make sure they’re in check, because when a recession does come or a stabilization, you’ve got to have as much topline [revenue] as possible and have expenses under control,” he said.

Charlestowne Hotels puts an emphasis on elevating its food-and-beverage venue experiences. Shown here is the Champagne room inside The Memphian Hotel in Memphis, Tennessee. (Charlestowne Hotels)

In general, consumers are still willing to pay higher rates if they’re receiving a great guest experience, amenities, programming and food-and-beverage offerings, he said.

The booking window, however, has shortened in some leisure markets.

“We’re making sure that we’re holding to our revenue strategy, not panicking our ownership. We’re trying to still maximize revenues,” he said. “It’s a little bit like that prep for a recession: Drive as much revenue as possible, or at least take advantage of as much revenue as possible, and make sure we have good expense control so we can drive [earnings before interest, taxes, depreciation and amortization] for ownership.”

Hughey said quality food and beverage is always expected, and there are opportunities to drive rate in those venues.

“That guest in an upper-upscale property expects a great [food-and-beverage] offering, and it’s part of that program, it’s part of the experience, it’s part of [what] drives that rate,” he said. “And it can be the bar, it doesn’t have to be a full-service restaurant.”

Charlestowne currently offers revenue management services for alternative lodging such as glamping and landscape lodging in destinations such as Utah, Wyoming, North Carolina, Wisconsin and in the Florida Keys. The company hopes to grow through that segment when opportunities come, Hughey said.

“We do think that’s a great market and it fits into our group, where it’s independent, it’s creative, experiential. We would love to continue in that space on a revenue management [and] marketing side, but also in full operation management,” he said. “We do that in Wild Rice Retreat up in Bayfield, Wisconsin. It’s a remote area, it’s a retreat for wellness, and it follows that model. It’s landscape, alternative lodging.”

As for short-term goals, Hughey said his team is “staying the course” and continuing the thoughtful growth it has achieved the past 15 years.

“We’re not taking properties just to add to the portfolio. We’re more thoughtful in the last eight months than we ever have been before. That’s where we’re going to go; it’s worked really well,” he said.

Raising the bar on food-and-beverage operations is also top of mind, he said. In the past three years, Charlestowne built up its food-and-beverage team in the corporate office and is now operating more than 30 food-and-beverage outlets.

“The resources from a corporate standpoint are more robust to make sure that we deliver on that [food-and-beverage experience] at our properties,” he added.

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