Big transitions take time. Since its acquisition by Bluesky in August 2016, InnVest Hotels (formerly InnVest REIT) has redefined its corporate strategy.
As president and CEO Lydia Chen explains, following the acquisition, “we immediately engaged a third-party consulting firm, [as well as] our shareholder committee and management team, to start working on our corporate strategy for the next five years.”
Featuring three strategic pillars — vision, objective and plan — Chen describes the company’s new strategy as an extension of its previous direction, “but we made it more dynamic.” She points specifically to the company’s culture, business model and investment-portfolio performance as key areas where the strategy has evolved.
For example, at the start of the year, InnVest Hotels moved to internalize the management of its hotel operations, establishing a new operational arm within the company — InnVest Hotels Management Limited (IHML).
“We spent about a year assessing our previous business model to see if there were any areas for us to improve on,” explains Chen. “We found our company [could] drive greater value [by taking] greater ownership of more financial levers, most of which were controlled by a third-party management company.”
Chen says the reason for the move is fairly simple: “we want to be closer with our hotel team — GM, management team and hotel staff…and we want to be closer with our guests,” she says. “And, at the same time, we can eliminate the fee we pay to a third party.”
“Since we launched the management platform, it’s provided our leading hotels with greater flexibility and a higher level of service,” Chen says, adding, “Our goal is to expand our [management] platform to also provide a solution to other hotel owners.”
Given the breadth of the company’s portfolio and hotel experience, the team believes it’s well positioned to be an asset to independent owners with properties in secondary and tertiary cities. “We can provide an end-to-end solution to potential hotel owners because we have the skills and a strong team with many years of hotel experience,” explains Chen.
While implementing these structural changes, the company recognized a renewed need to focus on its brand image and employee culture — particularly creating a culture its property-level employees could identify with. This included more clearly defining InnVest’s brand positioning, as well as updating its visual and verbal identity, including the company’s website.
To embody its desire to foster a high-performance team while remaining people focused, the InnVest team defined a set of core values — known as TRIP — which includes teamwork, respect, integrity and performance.
“People are the most [important] assets for the company, not only the physical buildings and hotels,” adds Chen.
And, to ensure the company can continue to develop its human capital, it’s formed partnerships with hospitality/hotel-focused programs at post-secondary institutions, including George Brown College and the University of Guelph, which offer co-op opportunities to students. Chen notes the company also provides a mentoring and coaching seminar at Humber College.
That said, the company is not ignoring its physical assets. As it works to achieve a strong balance sheet, InnVest’s extensive portfolio of Canadian hotels has remained in a dynamic state. “The hotel industry is always changing and, as a result, our portfolio needs to constantly evolve,” says Chen.
Portfolio performance has been addressed in two main ways — divestitures and property-improvement projects. In recent years, InnVest has sold close to 30 hotels (including 12 hotels in 2018). As Chen explains, these sales were made in alignment with the company’s new objectives. The assets “consisted of our non-core properties in the lower-barrier-to-entry markets and those with significant upcoming capital requirements,” she says. “And, another consideration — reducing the number of brands…To improve efficiency, we were trying to consolidate it to the four brand families we have [now].”
She indicates that, with this accomplished, the company is more or less done selling properties for the time being, as the team is confident in the 81 hotels it currently holds.
On the property-improvement side, significant capital has been invested in upgrading its hotel assets through renovations, including extensive projects at strategic hotels, such as Marriott Ottawa and Hilton Quebec City, which are set to begin in 2020. In addition, InnVest has been working to update all of its Holiday Inn properties and is preparing to implement a three-year plan that will see all 56 of its Comfort Inn hotels renovated to reflect the brand’s refreshed image.
“We’re going to renovate the exterior and interiors and [the renovated hotels] will look very different from the traditional Comfort Inn,” explains Chen. “The first prototype will be done in August [and] we’re going to renovate all of them over the next three years.”
Also on the horizon, the InnVest team has begun exploring adding U.S. hotels to its portfolio. “The U.S. market will probably be the leading market, in terms of the hotel industry, in the next five to 10 years,” says Chen. “We’ve identified some key markets [within the U.S.] we want to consider for acquiring properties. Cities under consideration include Boston, Seattle, Portland, San Francisco and Miami, but Chen says the team is open to other opportunities if something catches its eyes.
At this time, mid-scale hotels are the primary focus, as they will serve as a reasonable way to test the waters and gain an understanding of the new market. Chen says the company has begun a search for U.S.-based business partners to help facilitate its entry into this new market. “We would prefer, at first, to [work] with a local partner who has a deeper knowledge and experience [of the area].”