Clopton Capital CRE Podcast #1 Deborah Cannon
Deborah Cannon, President of CUSA LLC a nationwide hotel management company, joins us to discuss the state of the hospitality market today and throughout the pandemic. We discuss hotel performance, management, and investor strategies.
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Jake Clopton: 0:00 Hi everyone and welcome to the Clapton Capital CRE podcast. Today we have Miss Deborah Cannon on. Miss Cannon is a 40 year plus, but a hospitality veteran. She currently serves as the president and CEO of CUSA LLC, a nationally ranked and recognized hospitality and property management company. Miss Cannon has worked in all facets of hotel operations in sales and marketing and has managed over $550 million in hotel assets. This get his expertise and experience spans full service hotels, resorts to boutique luxury hotels to select service and limited service. Miss Canon and CUSA have managed over 45 states in the West Indies. So Debbie, thanks so much for coming on. And it would be great if you give us a little background on yourself and CUSA and how you guys started out.
Deborah Cannon: 0:55 Terrific. Thank you, Jake. I appreciate the opportunity of talking with you and just spending some time, just talking about what’s happening in our industry. Just as an introduction of my background, I actually started my career with Hyatt Hotels, many years ago. And then I was with Brookshire Hotels, which is a major East Coast Management Company. And I worked my way up from just a Director of Sales, all the way through to a Corporate Director of Sales, and then a Vice President of Development with them. Prior to going with Brookshire Hotels, I was with him for 8 years. I was with a major East Coast group that manage different hotels and some four and five star hotel properties, members of leading hotels of the world. So I worked in that arena. Brookshire primarily did a full service, distressed assets. So really cut our teeth on learning how to do projects from the ground up in terms of underachieving and troubled assets with Brookshire. Brookshire completed a private placement with a Wall Street Investment Group and the gentleman who was the president of Brookshire was Chuck Taylor. And Chuck Taylor and I decided to branch out and join one another as partners and form CUSA. It was originally called Cornerstone, and then we shortened the name to CUSA. So today, fast forward, Chuck passed away this past year, but Chuck had been had Alzheimer’s for about the last five to seven years. And so we were very sorry to see him leave CUSA, obviously. But I’ve been running the company for the last seven years in his absence, and now moving forward. So it’s been an interesting and challenging ride. We’ve been through, as a company, really four major economic downturns. We understand the process of this extremely well. And you know, this one is very different, but all of them had unique personalities, if you read to themselves. So it is looking at what’s happening in our industry today, and what we are doing in these challenging times is something that is very… I like the challenge of the opportunity. But also it’s something that’s very unique to any economic downturn that we’ve been through today.
Jake Clopton: 3:54 Right. Right. Yeah, this one is definitely different. So what are the types of assets you guys primarily managing in hospitality. And then like, how were those one specifically affected by the pandemic?
Deborah Cannon: 4:10 We manage all different types of properties, hotel properties. We manage both services as well as limited service, select service assets in all different categories, if you will, all different franchises, and at all different locations, and some fared better than others. When the pandemic first hit, one of the things that we were very centered on was not closing down any hotel that we operated. And out of the 35 hotels roughly that we operate, only one closed down and that was in Orlando, Florida. And that was already in a very distressed situation prior to getting into the pandemic. So I think that closed for other reasons. Keeping the hotels open was extremely important to being able to weather the storm and start the ramp up much quicker. We actually took over some assets that did not do that. The owners were not able to keep the hotels open. And they called us afterwards. And then we went into those hotels and had to reopen them and get them going again. What really became evident to me in that process, and although I knew instinctively that we needed to keep everything open, when I saw what happened to this particular hotel that we took over for the owner that he did shut down is that the hotel lost all of its LNRs, all of its business, and had to start over from scratch. Our hotels did not do that, that we did not close down. And so therefore, the ramp up time was a lot shorter. Today, if you look at different hotels, as the pandemic is lifting, and you’re seeing the really leisure travel come back in a stronger way, hotels that are in destination locations, i.e. like Panama City, Florida or on highway locations, where you have a lot of leisure travel are doing very, very well. They’re actually exceeding their 2019 numbers. So you do see some good pent up demand, if you will, in the leisure segment that you’re benefiting from in those hotels. But in those hotels, where it’s a heavily group market or it is something where you really rely on corporate business, they’re slower to recover. You’re seeing some of the pent up demand that’ll increase for a small or a shorter period of time, and then it backs off. So I’m cautiously optimistic about how that ramp up is going. We’re seeing numbers off the charts and some leisure markets, but you’re seeing slower growth where you’re more dependent on pound corporate and group business, which is taking longer to come back.
Jake Clopton: 7:08 Right. Right. Yeah, we’ve seen that too. You’re right. Like there’s a very healthy liquid consumer that wants to go out and travel and do leisure. And then some hotels we’ve seen were insulated from what happened because their industries like you know, they had a lot of trucking customers or something like that. Right. But yeah, it’s the corporate stuff, we’ve seen that, that’s taking longer to come back, for sure. The guys that had to shut down that you saw… I mean, was there a trend to kind of like the reasons why they shut down? Was it their choice to try to save money, or for the most part were they just forced to, or was there any sort of trends you saw there as far as turn down.
Deborah Cannon: 7:49 I think, when the pandemic first started, there were a couple of things that happened. Some local governments were very aggressive and shutting everything down, and you had to fight back. If you just acquiesced and shut down, that was one option for you. But we fought back in most of those markets and won. In other words, if the government said, “Well, we want everything shut down.” And they would classify hotels as non-essential businesses, so they want to just shut us down. We then went to back to get our hotels designated as essential businesses, so that they could stay open. That didn’t mean that they were running great occupancies. You had to dramatically cut your expenses. You had to dramatically do things that go after business and we really did, that was traveling during those times, Walmart, Amazon, traveling nurses, doctors, Kimberly Houze, our corporate Director of Sales, was every week putting out new guidelines for aggressive sales and marketing campaigns for specific pandemic business. And actually many of the franchises that we work with, pick that up and asked us if they could publish that to their franchisees at the time. So we took it a very aggressive stance in terms of really deploying our sales and marketing efforts to make sure that we could stay ahead of it and get as much business as we could. Those owners who did not push back against the government, in other words, saying, no, we are an essential business and we need to stay open, some of them just got scared and thought: “Okay. I can’t operate at single digit occupancies. How am I going to cut expenses to be able to weather that storm? What are their programs? The PPP was very instrumental in being able to help owners, the deferment of mortgage payments and things like that, certainly helped owners. And so therefore, you had to tap into all of those programs. There were some owners that chose not to do that. And I respect that. I just think that that really caused them if they were to look back on it now, it may have saved them a few dollars during that timeframe in being weathering the storm, but it costs them dollars in the long term of trying to reopen it and get it back up and going. So it’s a tradeoff.
Jake Clopton: 10:35 Right. Right. Yeah, we definitely saw the guys that took advantage of all the government incentive programs and the deferments, the PPP, and the EIDL loans, and, I mean, it goes on and on. I mean, really be able to hang in there kind of weather the storm and just get through it. You know, I haven’t really seen a lot that didn’t try to take advantage of them. I’m sure there were. But yeah, I mean, it’s definitely help things out. You know, so when the pandemic first hit, we were getting… You know, people that are looking to pick up hotel assets at discounts, and that really didn’t materialize, because people have been able to weather the storm so much. So we really haven’t seen a lot of people lose those assets. And now they’re starting to come back. So it’s great to see that kind of the doom and gloom that people were talking about didn’t really materialize.
Deborah Cannon: 11:26 Yeah, and that is interesting to me, because I think you’re right. There are a lot of people that thought: okay. There are a lot of hotels, and even our specialist service or clients. And by the way, we certainly are getting more that are really not in the actual receivership stage, but in the workout stage, if you will. We’re seeing a lot more of that, than we had in past economic downturns. You see more on the books that could go bad. But the actual reality of them going into receivership has not been the tsunami, that was thought was going to happen. I think, two reasons for that. Number one: the government has done a lot of things that were able to push that out, but those programs are coming to an end. So now what you have to say is, is this asset in a market that is going to recover quickly? If it’s not in a market that’s going to recover quickly, i.e. a lot of your university towns are still shut down and very dependent. Your property is very dependent upon that business. The same thing with group, large group hotels. So some of those programs are coming to an end. And will those assets be able to now sustain without those programs? And nobody knows necessarily the answer to that, but I think you had a situation where it really is an artificial propping up, if you will, of assets that probably would have gone back had they not had all those programs to rely on, most certainly. So let’s see what happens in the next phase when all that goes away. And it is going away. So now will they come back or will the owner, does he have enough cushion to be able to sustain it and keep going?
Jake Clopton: 13:36 Right. Right. Yeah, I mean, I think the SBA programs are coming to an end, you know, the third quarter this year, and then obviously, the idea of QPP are pretty much over with So yeah, I mean, it’ll be interesting to see who’s able to hang on and which types of assets end up, like, go into foreclosure and special assets. So are there particular, like sectors of the market that, let’s say like particular franchises or even like limited select service that are outperforming others inside the kind of like Travel and Leisure space? I think we all know, corporate travel is having a tough time. But in the assets that are doing well, are there certain ones that are outperforming relative to the rest of the market?
Deborah Cannon: 14:20 You know, that’s a great question, because I think people would tend to think: “Well the strength of the franchise, that’s what’s going to pull it through.” And in some cases, in the long term, that will be true. But we have everything from choice products to marry up products that are doing well. And we also have some that are doing poorly. It depends on the location. And it depends on the type of clientele that the mix of the business was. If it was heavily weighted to corporate and group, meaning over 70% was corporate and group, they’re not coming back as strong. Those segments are going to take longer. But I have a comfort in and equality in, in Panama City that are doing record numbers. You know, running in the 98% in occupancy, over $177 average rate. They’re amazing performances. Now do I think that that is going to last forever? No, I think that’s a lot of that is driven by pent up demand. And once that demand is satisfied, then it’ll back off. But I also think that you have to, and we’ve been very aggressive in this. You’ve got to be aggressive in going after business. And our sales and marketing departments are doing this. I’m going after business that is traveling, that may not have been a part of your segment before. And that’s how we’re sustaining those hotels that… You know, we’re in those 70% markets, where your corporate work is 70% of your business. We are really in going after business that they wouldn’t normally go after. And those hotels are ramping up. They’re getting to that 50% and 60% range. And that’s good. And we’ll keep sustaining that until that other business comes back. So I think there are ways to that you got to be aggressive, and going after business that is traveling, that might not be what you did before. And being creative about doing that. I think that’s extremely important to being able to weather what’s happening. And I also believe that it’s not, but you know, I don’t think it’s just a griffin that every hotel is going to come back, and that it’s going to come back strong, because the markets are all going to recover. I think, it’s what you do on the ground, as well as what the franchise is doing for you. That’s going to help combine together to make us be able to come back strong.
Jake Clopton: 17:00 Got it. Interesting. So one thing we saw in the pandemic is OTAs, and for anybody that doesn’t know, online travel agencies or OTAs, kind of like their marketing efforts kind of pull back. And I was wondering if you, with your new marketing efforts are seeing a lot of visits through OTAs, or if it’s more direct, or if that ratio has kind of stayed the same. What that looks like today?
Deborah Cannon: 17:28 Yeah, I think a lot of hotels… You’ve got to have a combination of both. And right now, when you are looking at markets where you’re trying to grow, in other words, you’re going from single and teams in occupancies to grow back up to where you were in 2019 to 2018, you’ve got to open up all chains to do that. Because not everything’s back. And so I think that what we do is, in every hotel, OTAs is something that we tried to use to our advantage. It’s not something we like in every hotel. We’d certainly like to replace it with business, you are not paying those kind of commissions on, but they’re necessary evil. So you got to do it. But you play in that market strategically. You do your revenue management, you do the things that you need to do on a weekly basis, and sometimes on a daily basis depending on the occupancy of the hotel, but we are using those to our advantage to fill in when the demand is not as strong, because those markets have not fully come back. But I absolutely believe that one of the reasons why our hotels are doing so well. And I will tell you, in our entire portfolio, and we are across many different markets, many different segments, group, full service and limited service hotel, I think we may have two hotels that right now in the month of really from March through June have exceeded their 2019 numbers in those months. And I may have two that if not all of our portfolio. And I credit that to really a very strong and aggressive creative sales and marketing strategy that we keep going out there every single week and saying: “Okay. What else do we need to do? How do we adjust this? What do we need to do to get gather more momentum?” Because you know that Walmart, Amazon, those types of people are traveling but those contracts are limited. In other words, they go away. They come and then they go out. And you have to replace it. So we’ve got to keep coming up with additional strategies as to what to do. And I give our sales and marketing department a lot of credit for remaining very focused and creative in doing that. And that’s why their numbers are where they are.
Jake Clopton: 20:12 That’s great. Yeah, I mean, definitely the people that were able to pivot and chase business in the right areas have done pretty well. Yeah. So as far as corporate travel in contracts, I mean, have you guys seen that start to pick up? Are you getting more interest in contracts and corporate travel, or is it still remaining really muted or, somewhere in between?
Deborah Cannon: 20:38 Yes, somewhere in between, because they’re different markets. Obviously, corporate comes back faster. In other words, in New York City, it’s not coming back fast. In Atlanta, it’s coming back faster. So I believe it all depends a lot upon the attitude of the government and the regulations that they’re backing off of that make it more. You know, as the vaccinations get out there and people feel more comfortable traveling, you’re seeing corporate come back. Some of that, you’re not going to see come back, because they feel like they can work better from home. I’m of the school of thought that you’re never going to be able to replace in person connections. And as much as we might like to do that over ZOOM or in the electronic world, that’s been a wonderful thing during the pandemic, and people have really gotten used to using it. I still think that corporations will find that in person relationship is invaluable. And you can’t do without it. So maybe they won’t have as much as they had before, but they’ll definitely come back. I think you’re seeing that in the group market too, that our major associations realize that they lose their association membership when they can’t meet, and when they’re not doing the group business. So that will come back. And it’s just more and more in different pockets of the country, as you see the states open up more. In other words, have less regulation about masks and those and gathering and getting together. As you see those restrictions being lifted in different states, the less restrictions, the quicker that comes back. And the more that you’re going to see both corporate and group recover. Because I think in the end, corporations understand that in person whenever to entirely go away, and the same thing with your group business.
Jake Clopton: 23:03 Right. Yeah. I mean, just for instance, in our industry, in general, I mean, you have to travel for certain things. I mean, if I’m doing a hotel loan for somebody, you have to do a site visit for property inspection. I mean, there is some corporate travel that’s always going to be there for sure. I think, the ZOOM adoption maybe taking the froth off of corporate travel, and some corporations are going to kind of pull back on expenses a little bit, but it definitely seems like it’s going to come back eventually. Conventions come back in a big way. I think people get more and more comfortable and yeah, I mean, it’s definitely a comfort level, I think, for employees right now too, whether or not they’re comfortable traveling.
Deborah Cannon: 23:45 Yeah. And I’m glad to see what our industry is doing and the major franchises are doing more of an honor system. And you’re seeing that. In other words, if someone has a vaccine, they don’t need to wear the mask, and therefore it frees up our industry. It frees up our employees. It frees up the traveling public. They don’t feel like it’s like a hassle to go into travel, although the airlines are not there, and so you’re still struggling with that.
Jake Clopton: 24:20 No, not from some of the videos I’ve seen.
Deborah Cannon: 24:25 When you’re seeing on the news where you’re seeing fights break out on airlines and stuff because people are just frustrated with this. This is not an enjoyable way to travel. It’s just not a conducive to large scale travel yet. So that’s got to change in order to see a normality come back, if you will, of a general ongoing normal traveling public. That’s got to change.
Jake Clopton: 25:01 Right. Right. And that’s a good point. I think, a lot of people when you’re talking about hotels, we think about: “Okay. What’s the hotel experience going to be?” But you got to get to the hotel first. So, there’s definitely consideration for the experience of getting there in the first place. So that’s a good point.
Deborah Cannon: 25:20 Yeah.
Jake Clopton: 25:22 So one thing we’re doing right now is financing a lot of new hotel development, actually. A lot of the projects that were supposed to break ground during the pandemic were mothballed. And now they’re starting to come back. Lenders have lent credit, and investors are more comfortable, and we’re moving these projects forward. For hotels that are opening like now, this year, in the coming year, what are some of the challenges you see for brand new hotels that are opening? And what are some of the advice to investors that are just coming into this market with a new asset versus, guys that were here the whole time and have kind of figured it out?
Deborah Cannon: 26:09 To me, I think that the long term trends are good. I think that you have to look at different markets and say: “Okay. If this is a heavily corporate market, I may need to back off on some of what I thought was going to.” Maybe 10% to 20% of that corporate will never come back. So you may need to adjust your thought processes to how your market segments play out, and how much more pleasure, transient business, social business can you insert into those percentages. And, by the way, the demand for that business is much higher right now. And I also think that that’s going to remain for a while, but as a developer, I would think: “Okay. So how do I tap into that? What do I need to put into my project that also has that element to it? Whether that be additional amenities or whether that be different things that you think about doing together with the tourism market in that community?” I would think about that. Because I do think that in the short run, you’re going to need that. And when I say short run, first five years, until you see corporate and group really come back in a huge way and grow. So those are just things I would adjust my thinking to. “What other amenities should I have? What other things do I need to affiliate with in order to make myself successful, both in the short term and the long term?”
Jake Clopton: 27:47 Got it. Yeah. Are you seeing owners trying to capture more revenue streams, like charging for parking or maybe like that?
Deborah Cannon: 27:58 You definitely see that. And I think that that’s a good thing. I mean, resort fees are something that is not good for the consumer, necessarily. They don’t want it. But it, certainly, is a great revenue stream for the developer. So all those things are things that developers need to be thinking about. And I also think that they need to be thinking about what do I do to make it attractive to a transient traveler as well. And a small example of that is, if you were thinking about not having a pool, because you’re primarily in a corporate market and you don’t need it, well, now you might be thinking, maybe, I should be having a pool, because that’s my transient market that would help me in that regard. Same thing with SPA services, same thing with any leisure activities or things that you can… You know, if you’re in a good location for bicycles, do you have bikes? Do you rent them out? You know, those types of things, and I know that that’s kind of a foreign to some of our thought process, but I think we have to think like that. How else do we attract a market that may not be totally what we did in the past? We’ve got to start thinking out of the box of what things do we put into our development that will attract a wide variety of clientele versus just one segment or two segments?
Jake Clopton: 29:28 Got that. That’s interesting. You know, a lot of the commentary and discussions I was hearing during the pandemic was, guys were thinking: “Do we need to move to a model that’s basically as little service as possible and as light and as lean as possible?” And you’re thinking here that like now we’re talking about like more mousetraps and more amenities to get people in the door for experiential type stuff versus just staying the box.
Deborah Cannon: 29:56 Yeah. And you bring up such a great point there. I think in our industry sometimes we will go too far one side or too far to the other side. In other words, like everyone wanted to go green, and they thought: “Okay. We’re going to do this whole push up conservative, and going green.” So what we did was backed off on service. What we did was said, “We’re not going to clean your towels. We’re not going clean your room. We’re not going to… You know, those types of things.” All under the guise of green conservation. Well, what the public saw there was that you are charging me the same rate or sometimes more and giving me less. We can’t do that as an industry. We have to say: “Okay. What can we do?” You know, when the pandemic happened, and so therefore, we’re backing off on cleaning your room. So that we’re in the room last time, and all of these different things are being done under the guise of the pandemic. Breakfast is being backed off on; all those things. My thought is, we need to come up with creative ways to give more service, and yet do it in a way that is more safe. How do we do that? Well, there are all kinds of things. For example, you can do smart technology in the room where you’re doing it by voice, and not touching all of the apparatus in the room. Do more things like that? That’s better service. And an upgraded product, versus just backing off on everything and not giving it to you. So we need to start thinking out of the box, to me. We need to enhance service, whether it be the technology that we can put into rooms, so that you don’t have to touch surfaces, whether we can do things with automating check-in and on-phones. And we’ve already got that technology. We need to use it a whole lot more. New development needs to really focus in on those technologies that they can use, whether it be the phone that opens the guestroom door, or that you are able to talk to the room, and it does certain functions for you. All of those things can be done right now. And those are things that I think would just enhance the experience and doesn’t take away the service from the guest. If you know what I’m saying.
Jake Clopton: 32:44 Right. Yeah, I definitely do think customers recognize inflation in the service sector rates, where same price, but you get less. You know, the not cleaning the rooms everyday thing. I’m not sure how you get safer with less cleaning.
Deborah Cannon: 33:05 Yeah.
Jake Clopton: 33:06 Right. They’re wearing gloves and masks anyways. Right. So I mean, not even in there when they’re doing.
Deborah Cannon: 33:11 If you can imagine… I mean, that’s what we’ve done. That’s what we’ve done. Now, it’s just like with the green energy technique. I mean, they would say things like, hang up your towel if you don’t want us to wash it. Okay. And that saves. Yes, it does. But it also says: “Okay. I’m not going to charge you less, because I don’t wash that towel.” You’re paying the same amount of money. We need to just really think about what do we need to do to enhance service, not just take it away. And even with the pandemic, how do we do things that are going to benefit our guests. And I don’t know what every single one of those ideas is, I think that it would be… You know, our franchises are brainstorming about it. And they’re bringing out every day, they’re coming out with new ideas. I get something in my inbox almost every day from Marianne saying: “Here’s a new idea that we’re putting in place.” They’re trying to think ahead of the game. And all the other franchises are doing this as well. But just thinking ahead of the game, instead of just taking away things. How do we do things that are going to make the experience better for our guests and give them a great experience still?
Jake Clopton: 34:31 Right. Yeah, I mean, I definitely think, people, especially right now, they need to think probably 12 months ahead. I mean, what happens if we get another surge and then state and local want to shut down again. You have to prove that you’re safe. And you got to make customers feel safe.
Deborah Cannon: 34:50 And essential business for sure.
Jake Clopton: 34:52 Right. Right. Yeah. So I mean, I definitely think, especially right now, just kind of like thinking day to day. Probably in the past, and you really didn’t think like what’s coming down the line 12 months from now, getting out of that, and then making sure you’re prepared for the next time this happens. Because I don’t know… If you’re somebody that weathered the storm during a pandemic, can you close down again, or if you can do it again without having some sort of preparation in place?
Deborah Cannon: 35:20 Yeah. Very difficult. And I think that we as an industry, I think, one of the things that we learned was that. And I think as people we did learn this too. Don’t be so quick to give up your liberties. Don’t be so quick to shut down. Because it really is a very difficult thing. Look at restaurants and bars and lounges and what’s happening to them. And the slow comeback that they’ve experienced and the hardship that they’ve had to go through. We have to be careful. We have to think if another wave comes through, what are the options? And I would hesitate to close down everything again, because of the hardships that it caused. And I think people understand that and say: “Okay. What are the other ways that we can do this without shutting down everything?” Because I don’t think that the full impact of those shutdowns has been fully realized yet.
Jake Clopton: 36:33 I don’t think so either. I think the government did a good job of pushing it out. And everybody, well, not everybody, but a lot of people… You know, enough kind of slack just to hang on.
Deborah Cannon: 36:48 Yeah.
Jake Clopton: 36:48 Hopefully, everything fixes fixes itself out. They propped up asset prices, the grants, the PvP aid, all this stuff. So we’re kind of in that weird middle zone, where it’s not over, but we’ve been through a lot, and yeah, there’s definitely a road ahead. That’s good question marks in it. Yeah. Yeah. It’s interesting times, for sure. So, let’s talk about people that are just getting into the industry today. So we get a lot of requests from guys that want to buy or build their first hotel. And what somebody’s advice for people like that? I mean, a lot of the stuff that they may have been learning in the past to prepare for how to operate a hotel, today, I mean, it’s different. I mean, it’s a different world. So what somebody’s advice for new hoteliers who’re getting in business today, maybe like getting a new choice flag. You know, I was like a comfort end or something like that. And they’re going to be opening doors in next six months or something like that.
Deborah Cannon: 37:55 Yeah, I think and this may… I don’t want it to sound self-serving, but you need a good management company. If this is your first time as a hotelier, align yourself with a good management company. And even in the long run, you want to run it yourself, then learn from a good management company, so that you know what to do. And you can set that up. I’ve worked with many owners where I would come in, and they wanted their family member to run the business eventually. But we worked directly together over a three-year period of time, and we trained up that person. It was actually the owner’s son, and I’ve done that in different circumstances. And he eventually took over. But we had a predetermined period of time. We knew exactly what we were going to do together. We were going to train him to be able to run this effectively. And that is a very good way to get yourself not into trouble, but to put a very good foundation in place for the long haul for you to be successful.
Jake Clopton: 39:13 Yeah, that’s a really great strategy.
Deborah Cannon: 39:15 And I would firmly recommend that. And also aligning with a great franchise. And there are so many great franchises out there. And every market has a different franchise alignment that would work best for it. So you don’t necessarily have to be with one franchise all the time. There are multiple franchises that will work in different markets and there are obviously different price points to those franchises and developments. So that would also play into that. But when you talk with a good management company, they can help you select a good franchise for a certain location. Also they can help you to be able to put together a program and a plan that makes sense for the individual competitiveness of that community. So what amenities should you have? What should the room mix be? Those types of things. So involve the management company on the technical advisory side. And then make sure that you do a pre-opening sales effort. So often, and you mentioned this earlier. So often owners will skimp on that pre-opening sales effort. And that’s a huge mistake. Because if you open the doors having not done that, your ramp up comes while you have expenses that once the hotels open, are much greater than when the hotel is not open. So you want to be able to have business on the books, the day that you open the door, that comes with a pre-opening sales effort. So I highly recommend that. And a good management company is able to put them in place. A good management company will do good budgets, so that you have a good understanding of what the needs are, both from a cash flow perspective, as well as your long term financial success of the hotel. That’s extremely important. So all those things, I would say, are very, very critical to opening a good hotel and for getting in on. You know, it’s a great industry to be in. Just do it wisely and smartly. What you may have done in the past may translate in some ways to a hotel, but it may not be exactly like a hotel. I had an owner say to me… You know, he did convenience stores, and he got a hotel business. And one of the crazy things he said to me was, I don’t need to have a maintenance or housekeeping department in my hotel when it opens, because in the convenience stores, I’ve just always had that around me. And I didn’t have to employ it in advance. I could just call it when I needed it. Okay. That worked in the convenience center. And he is very wise man in his business, but he didn’t understand how that translated into a hotel operation, which is a little city that is open 24 hours, and you got to have all these things in place. So I just recommend working with people who know what they’re doing, and learn from them.
Jake Clopton: 42:34 Right. You know, that’s a really interesting point you bring up. A lot of the guys that we see that are instigating in the industry, and they start with either just kind of their family buys a piece of land, or that’s kind of starting from the property level or the franchise level. But I very rarely see people start with a management contract. And then put the rest of the pieces together, which it actually makes a lot of sense to start with a management company to help with all the other pieces. And a lot of times, I see management be like one of the last things they’re thinking about. So yeah, I mean, that’s actually some pretty great advice that I think a lot of guys can take. And we said the same thing to a lot of startups like: “Hey, who’s gonna manage this?” I’ve gotten answers: “I’ll manage it. I’ll fly in every weekend.” I mean, it’s a business. It’s not investment in hobbies, its business. And it needs right oversight minute to minute. So yeah, I mean, that’s some great advice about getting in touch with that.
Deborah Cannon: 43:39 Yeah. I’ll tell you one quick story that we opened a microtel in Meridian, Mississippi. And this owner, he wanted his son to eventually run the business. And so we set up a program where we did the technical advisory, all the preopening worked with him through consulting on the hotel to get it opened and all those things. And by the way, he invested in this. Anybody that knows what it is. Microtel is a very economy oriented brand. So he had to invest in having a management company and doing it this way. But his son… Our original deal was two years. And we would train up his son and get him ready. And we did that. By the way, this hotel was phenomenally successful and it was one of the best opening microtel had ever seen. In fact, US franchise systems at the time, actually came to us and had us do that same program for other microtel that they paid for. They paid for, because it was such a successful opening. But after the two years, the owner came to me and said, “Debbie, my son’s not ready. I want to go for another year in this program, and then I believe he will be ready.” And we did that again. We extended for another year. And at the end of that year, his son was ready to take on the hotel and sustain what we put in place. And I think that was so important and what a wise man, this owner was to recognize that he wants to give something to his son. He wants a legacy for his son. And isn’t that a great thing, but he also wants to equip his son with exactly the tools that he needs in order to sustain the business over the long haul. And that was what that owner, that father was able to do for his son. And that remains the case today. So I just highly recommend doing that. Even if your goal is to run it yourself, do something on the front end, that makes it, so that you have a running chances that.
Jake Clopton: 45:59 Right. Yeah, it’s definitely a smart strategy. You’re taking these guys from no experience to experience hoteliers where they get to see all of your strategies and your toolbox, otherwise wouldn’t have exposure to. That’s great. It’s really great advice. So your company, CUSA, what is your guys’ kind of strategy for the next 12 to 24 months, or like couple of years? I mean, are you trying to use this opportunity for the pandemic to pick up more management companies, or major contracts, or are you going more into kind of like special assets? Like what’s next for the future for you guys?
Deborah Cannon: 46:43 Well, CUSA has always… You know, when we started the company, it was in the early 1990s. So you were doing a lot of RTC and FDIC work. And then with that, so we cut our teeth on those types of programs. And then when that kind of recovery occurred. Now, we then translated that into putting that sales and marketing and that turnaround expertise to private owners. And then the next economic downturn came in. And we still have many contacts and still do today in the asset management world and the special service servers. And we did a lot of work in that arena. Today, our portfolio is a mix of private owners, as well as special servicers, and those types of assets. I believe that we will always have a mix of both private owners, who understand the value of an aggressive management company, who can get in there, especially during a pandemic, and keep pushing forward. Not throw their hands up and say, there’s nothing I can do. But not only on the revenue side, we maintained that there always is something that we can do. And we wanted to make that happen. We also cut dramatically expenses. We did budgets that sometimes we were doing every 30 days at through an MLP process, so that we could just adjust to revenue shortages that we saw in our expenses. You need that kind of intensity during the tough times. And I don’t know that everyone fully understands that that owners look at and say, “Well, here’s an expense that I could do away with, because that’s a short term fix.” Well, what a good management company will do is they’re going to be working with you to maximize revenues and to minimize expenses during the tough times. And you don’t realize how valuable that is to have somebody looking at that every day saying, “What can I do?” In addition to that, and everybody will say this, that our recruitment of employees is extremely difficult right now, and it is. In our industry, this is one of the most challenging things. Well, management company has many more resources than an individual owner does. It doesn’t mean that we don’t face the same challenges, we do! We have the same exact challenges that an individual owner has, but our resources are better. We also have the ability to say to an employee that is looking for growth opportunities. We’re bigger than just one hotel. And so you are wanting to grow, here’s an opportunity to work for us in this hotel and you can grow. So we have advantages that we bring to the table. In addition to that we do all kinds of incentive programs for employees and we’re working with different groups to try to come up with ideas on recruitment and gaining additional employees that we’re constantly working on, so we bring that benefit to the table. And I think when you look at all those things, you’re looking at it saying: “Okay. As a company, I want to continue to grow with private owners.” And yes, I do the special services work, and we’re very good at it. We’ve been serving as a receiver for over 37 years. So we’re not new to that industry. And so therefore, we have a lot of expertise that benefit special servicers. I will keep doing that. But I think private owners really benefit from having the expertise of a management company when it’s in tough times. And yeah, you’re gonna have to invest in that, but it’s an investment that’s going to pay you dividends over and over and over again, if you do it wisely.
Jake Clopton: 50:48 Yeah, that’s great. That’s great advice. So this is a great conversation. I really appreciate you jumping on in time with me on. How can people get in touch with you?
Deborah Cannon: 51:00 Well, we would love to talk with you. Our website is www.1cusa.com. That’s www.1cusa.com. Adam Biesecker is our Director of Development. And he and I work very closely together on any new business opportunities. And we’d love to talk with you. You can reach out to us by phone or email on our website. It’s an email for [email protected] And you can reach us there, or feel free to email me at [email protected] And we’ll get right back to you.
Jake Clopton: 51:45 Great. Well, listen, again, I appreciate you jumping on. Thanks so much for all the info and the conversation. And yeah, we’ll speak soon.
Deborah Cannon: 51:53 Thank you. So appreciate you.