Harris Rosen, founder and president of Rosen Hotels & Resorts, Orlando, since 1974, has seen a lot of things change in the 35 years that he’s been in the hotel business.
One thing that hasn’t is his dedication to keeping his hotel empire—a seven-property collection that ranges from the Quality Inn he started with to the most recent 1,500-room Rosen Shingle Creek resort—small.
“Bigger isn’t always better,” he says. Now that the economy has soured, he feels his longstanding belief in keeping Rosen Hotels small is more justified than ever. “For 35 years, people have always looked at us and said, ‘What a silly company. They have grown so slowly, from one hotel to seven hotels. They could have done so much more if they would have operated in a normal way.’ Well, it turns out that our rather conservative approach to operating hotels wasn’t such a bad one after all.”
We caught up with Rosen recently to find out why he feels his approach is suited to today’s economy and customer mindset.
AM: How is being a smaller company helping you cope with the difficult economy?
Rosen: Having controlled the growth has allowed us to remain virtually debt-free, which means we have the flexibility to adjust to what the market is telling us it wants in terms of rates.
AM: We keep hearing about the amazing rates being offered at luxury and resort properties right now, and how people now can get a lot more hotel for their meeting dollars than they could in the past. Do you really have more flexibility in rate structure because of your size?
Rosen: There’s a part of the equation that is critical: If those properties continue to offer value, people will continue to patronize them. The problem is that if you have $500 million in debt, you can’t do that for long because you can’t generate a positive cash flow. So it almost becomes a checkmate. You might philosophically understand the need to offer value, but if your break-even is at [a] 70 percent occupancy and a $300 average rate, and you’re selling rooms at $150, who’s going to pay the lender? If you don’t have a lender, it becomes less of a burden.
AM: Why have you grown your hotel portfolio so conservatively?
Rosen: One has to suppress the desire to grow just for the sake of growing, to silence the ego monster by asking: “Do I really need to have this new property or acquire this group of hotels? Are there real efficiencies of scale? Will I really be able to manage the additional responsibility?” If people were really honest, more often than not they’d admit they were better off staying the way they were. And not just in the hospitality industry.
The Citicorps and the Bank of Americas and Lehman Brothers and GM grew and grew and grew and told us they were growing because it made sense. But then they got too big to manage effectively—we know this because we’re heard them declare that they got so big they didn’t know what all these little divisions were doing. It certainly happened with AIG and Hank Greenberg. So what’s the point in expanding and expanding if you expand beyond the capability of your managers and your operators? I think we’re going to see a change philosophically in how all kinds of private-sector companies function in the future. They will weigh very carefully the need to acquire another company or to build more factories or outlets.
AM: Or hotels?
Rosen: We’ve had opportunities in the last six months to purchase about 35 hotels. We’ve resisted. Some of them are being offered for pennies on the dollar. But will it enhance what we have? Can I manage them the way I like to manage my hotels?
AM: And how do you like to manage your hotels?
Rosen: Among the wonderful benefits of being small are that I can return every e-mail and every call I get every day. Any minute of any day I could swoop down at one of our properties and take a hard look at it, as I do to each of our properties regularly. I hold regular meetings with people, with no managers present, and ask them how it is for them to work here.
AM: Can you tell me a little about what you tongue-in-cheek have called your “Rosen stimulus package”?
Rosen: We decided to do a rather ambitious refurbishing of our leisure properties—spending a little more than $30 million on close to 3,000 rooms. It is something that we have been talking about for some time--it is difficult to make those kinds of decisions when the economy is declining.
What happened as a result is a) there is an abundance of laborers to do the work, and b) subcontractors who need the work are working with great enthusiasm and passion. There’s also an inclination for those providing the materials and labor to really sharpen their pencils.
So here we have this work that’s going along quite beautifully, and when I walk through the job site, people thank me for the opportunity to be working even when they’re doing the work for less than we had budgeted. That’s really a wonderful opportunity to do something good and receive some benefits from doing it, both at the same time.
We will finish the refurbishing a little ahead of schedule and under budget, then move onto the Rosen Center and Rosen Plaza, where we expect to spend somewhere between $50 million and $100 million doing guest room refurbishing and adding some meeting space and perhaps some guest rooms. What would make it a perfect decision would be if, at the end of the work, business would turn around so we could anticipate a return on the investment.