White Lodging makes a bigger bet on Austin

White Lodging's next project will add 1,000 rooms downtown.

By Shonda Novak
AMERICAN-STATESMAN STAFF
Sunday, July 30, 2006

White Lodging Services Corp. plans an extended stay in Austin.

The family-owned hotel development, ownership and management company has more hotels in the Austin area than in any other city — and more are on the way.

The Courtyard by Marriott and Residence Inn at Fourth and San Jacinto streets are scheduled to be the next White Lodging hotels opening in Austin. The company is planning to add a three-hotel complex downtown that some say could help Austin draw more conventions.

Next month, White Lodging is scheduled to open two new Marriott hotels downtown — a 179-room Residence Inn and a 270-room Courtyard by Marriott — followed in October by another Courtyard that will open near Austin-Bergstrom International Airport.

And last week, the company announced its biggest Austin project to date and the city's largest hotel development ever: a proposed $185 million complex that will add 1,000 rooms in three Marriott hotels, including a 650-room convention hotel, on land bounded by Congress Avenue and Second, Third and Brazos streets.

"Once you weed out Las Vegas, there's not a whole lot of hotels of this scale and size being built," said Deno Yiankes, president and chief operating officer of the company's development and asset management group. "That should speak to our confidence in the city of Austin."

Yiankes said the company is pursuing three other potential projects in Austin, although he would not say where.

White Lodging's 179-room Residence Inn and 270-room Courtyard by Marriott are scheduled to open downtown next month. The company has owned and managed hotels in Austin for 15 years.

"We're just believers in the unique set of dynamics that exists in the market," Yiankes said.

He cited the strengths of a capital city with a great blend of technology companies and "a variety of other stable businesses that generate room nights throughout the year," including state government and academic institutions, plus an expanded convention center with 900,000 square feet — "a big room-night producer over the foreseeable future," Yiankes said.

When all the projects are finished, White Lodging will have 19 hotels with more than 3,100 rooms in Austin.

The largest of the proposed downtown hotels will be a 26-story Marriott that will be the region's second-largest hotel after the 800-room Hilton Austin downtown. There also will be an 11-story Renaissance Hotel with 200 rooms and a 15-story SpringHill Suites by Marriott with 150 rooms.

"We have been tracking the Austin lodging market since we made our first investment in this great city back in 1992," Yiankes said. This year, "occupancy levels in the downtown market are exceeding the peak 1999-2000 levels and pricing has rebounded quite nicely as well. We are big believers that the downtown Austin market will continue to see strong demand growth into the foreseeable future."

Family tradition

Bruce White, the founder of White Lodging, comes from a tradition of entrepreneurship. His grandfather launched a billboard company, Whiteco Outdoor Advertising, which his father, Dean White, sold in 1998 to Chancellor Media for $962 million.

Aside from the hotel company, other family enterprises include residential construction and the Celebration Station amusement park chain.

The hotel company, based in Merrillville, Ind., expects gross revenue of $550 million this year and more than $600 million in 2007. It has more than 40 projects in development across the country, aside from the downtown Austin hotels.

White Lodging is known for acquiring underperforming hotels and turning them around. It also builds, owns and manages hotels for other chains through long-term management contracts.

In addition to Austin, the company has a large concentration of hotels in Indianapolis, with other strongholds in northwest Indiana, Chicago and the Denver area. It also has four hotels each in Houston and San Antonio.

The early 1990s

The company focuses on obtaining long-term management agreements with leading brands, primarily Marriott and Hilton, but is adding new licensing agreements with other operators, including Starwood Hotels.

White Lodging's first Austin hotel purchase came in the early 1990s, when it bought a Ramada Inn on Interstate 35 North. The company renovated the hotel and converted it into a 198-room Courtyard by Marriott, then built an adjacent 63-room Fairfield Inn & Suites that opened in April 1995.

"We look for locations where we have the opportunity to grow, just as we have in Austin," said Judy Bronowski, vice president of business planning and communications. "It's much more effective and efficient for us to manage multiple hotels in a market than it is to manage single properties."

In addition, the hotels complement one another because each has a different price point and targets different customer segments. The extended-stay Residence Inns, for example, are designed for travelers staying five or more nights. The Spring- Hill Suites cater to younger, hip business travelers and families, Yiankes said, while Marriott's Courtyard hotels target business travelers.

Yiankes said that owning and operating hotels in Austin for 15 years gives the company a great advantage in deciding on potential future projects in the city.

"We know about the ups and downs, and we understand those cycles and have a good comfort level that we can be successful in good times and in bad."

And being a family-owned business, he said, enables the company to "take a long-term perspective with our developments and manage our way through the inevitable cycles of demand that occur in between."

"It allows us, instead of quarter to quarter, to look at things over a mid- to long-term basis, and that's one of the contributing reasons why we've been able to enjoy the growth we've had in Austin," Yiankes said.

Location is key

The company has built its portfolio, and revenue, on a reputation for knowing the cardinal rule of real estate: location, location, location.

The site-selection duties fall almost exclusively on Yiankes' shoulders.

The company analyzes a market's demographics, economic and employment trends, and retail and office vacancies, among other factors, Yiankes said.

Downtown Austin scored high on demand for more hotel rooms, he added.

"The extremely high occupancies the market is seeing currently tells us there's not a lot of room nights being turned away from the downtown market," he said. "When you're running at close to 80 percent occupancy, the only night you're not filling up is Sunday night."

White Lodging says 1,000 more hotel rooms downtown will help Austin attract bigger conventions, allowing the city to compete with San Antonio and other convention destinations.

Since January 2004, the city has lost 24 conventions because it did not have enough big hotels, said Cynthia Maddox, a spokeswoman for the Austin Convention and Visitors Bureau.

The proposed new Marriotts will require the deep pockets of a well-capitalized firm such as White Lodging, Yiankes said. The company invests its own money but also secures traditional financing through relationships it has with a half-dozen banks. A lender on the proposed Austin project has not yet been determined, Yiankes said.

Last year, to generate cash, expand in new markets and focus on hotel management, White Lodging sold 100 hotels to RLJ Development, the nation's biggest African American hotel developer, for $1.7 billion. The sale included all of White Lodging's Central Texas hotels, although the company continues to manage them.

White Lodging will manage the proposed new hotels on Congress Avenue, which will be owned by affiliates of the company.

Existing tenants

It is not known yet what approvals White Lodging might need from the city for its project. There has been some controversy because the project would replace popular local businesses such as Las Manitas Avenue Cafe and Escuelita del Alma, a bilingual day care center.

White Lodging officials say the company plans to work with existing tenants to reach a "mutually satisfactory agreement."

"We have been active in the Austin lodging market for nearly 15 years with 16 successful hotels under management, and each one of these developments has presented a unique set of challenges and opportunities," Yiankes said. "And in each case, we have been able to reach a solution that works for all parties involved. We are not about to blemish our successful track record now."

snovak@statesman.com; 445-3856