The global hotel groups talk like they're going to inherit the earth. So how can a small brand like Omni thrive? In his first major interview as its new president, Kurt Alexander outlines his plan.
Editor’s Note: Skift Senior Hospitality Editor Sean O’Neill brings readers exclusive reporting and insights into hotel deals and development, and how those trends are making an impact across the travel industry.
At first glance, Omni has the odds stacked against it.
- It only has 51 hotels and resorts.
- The global giants – such as Marriott, Hilton, and IHG – argue that smaller players like Omni can’t compete with their ability to use enormous loyalty programs to drive guests to their thousands of properties.
It’s up to Omni’s new president, Kurt Alexander, to navigate among the giants.
- Alexander became president of Omni late last year, replacing Peter Strebel.
- Robert Rowling, the Omni’s owner, recently passed day-to-day oversight to his youngest son Blake Rowling, via their Texas holding company TRT.
The new CEO said the largest hotel groups overcharge owners.
- “In the framework of value creation and value capture, the big brands have gotten really good at creating a lot of value by driving more revenue — but then they capture all of that for themselves,” Alexander said.
- “If you line up the cost of Omni as a brand, it’s less expensive [for owners] than the big brands from a franchise fee, a royalty fee, and, in some cases, a management fee standpoint,” he said.
Alexander is partly “talking his book” by saying the big brands are overrated. But he also ran the numbers.
- In 2021, when Alexander was chief financial officer, Omni de-branded five suburban hotels to double down on conventions, resorts, and landmarks.
- Omni toyed with keeping the properties for their real-estate value and hiring one or two of the big brands to run them.
- “We actually went through an analysis of, ‘What if we brought in a third party to manage them or got a franchise with Marriott or another brand?'” he said.
- “Based on our rough math, our revenue and our RevPAR [revenue per available room] penetration would be higher with the big brands on these five properties without question,” he said. “But our EBITDA would be exactly the same or lower. So you sit there, and it’s like, okay, they’re creating more top-line growth, but they’re capturing it all through the fee stream.”
In the end, Omni sold its five hotels rather than flag them with bigger brands.
Alexander would like to partner more with institutional owners. He thinks Omni has ways to compete with the global hotel groups on that score.
- Omni outright owns “north of 80%” of its hotels, he said.
- It runs two properties as a third-party manager.
- For its remaining properties, it has ownership stakes of only between 10% and 50%.
- Alexander would like to expand this last category. He has been cultivating partnerships with institutional investors (pension funds, alternative-asset managers, and other organizations that invest on other people’s behalf).
- “A lot of the institutional investors have come out with redefined strategies around wanting to diversify their brand base,” Alexander said.
- He said Omni could be an attractive partner because it only has 51 properties. It isn’t likely to compete with other hotels that an owner might also have in a market. The big hotel groups, on the other hand, might very well have hotels that would compete. (See my earlier column for context on the history here.)
- Alexander also said Omni is flexible on brand standards, which may make it more appealing to partner with than the large hotel groups, which can have binders full of requirements about how everything needs to look.
Alexander is pushing to capture luxury-minded leisure travelers through new thinking about loyalty and experiences.
- Alexander wants a revamped Omni loyalty program to launch next year. Details were light at this point.
- “We’re realigning our loyalty program to focus on experiences, and we’re recalibrating from a frequency-based program to a spend-based program,” Alexander said.
- His team also launched this month the first phase of a multi-channel marketing campaign with the theme of “Experiences Matter Here.”
- “We put guests at the center by offering experiential offerings that are locally relevant such as our annual Fish to Fork culinary event in Amelia Island, Florida, Cowtown Unplugged music series in Fort Worth, Texas, and The Annual National Gingerbread House Competition in Asheville, North Carolina,” Alexander said.
Alexander wants Omni to focus on properties “at the intersection of group and leisure.” In other words, he wants the company to target two sets of customers that tend to drive higher-than-average margins.
- Roughly half of Omni’s business comes from groups and events.
- The other half are premium and luxury vacationers.
- The company thinks that its group business can serve as an efficient way to acquire leisure guests.
- “We have a group flywheel effect,” Alexander said. “We have millions of people a year who are staying with us who probably are not choosing to stay with us. It’s the meeting planner or the corporation or the event organizers who are booking.”
To keep winning these big-spending customers, the 65-year-old company is upgrading its property network.
- The company has this year self-funded roughly $250 million in renovations.
- It has committed $1.5 billion to capital expenditure over the next five years.
- Over several years it has been moving the average quality of its property to the top end of “upper upscale,” meaning that its average rate as a brand is often close to $300 a night.
- It has opened a half-dozen properties since 2018, including this year’s Omni Tempe Hotel at Arizona State University (ASU), a $125 million property that opened in April, and Omni PGA Frisco Resort — a $520 million property that opened in May.
Omni has also begun a brand refresh this month.
- To feel more luxurious, this month Omni changed its brand name logo. It has dropped the flower icon. To my amateur eye, the letters for the word Omni now look more like the letters in the logo for the luxury house LVMH.
- “When we were kids, and we walked through a hotel’s doors for the first time, we had a sense that “This is so cool,'” Alexander said. “Maybe it was because the hotel had HBO in it, but regardless, the measuring stick has certainly changed now. At Omni, we want to create that sense of place, and engage all of your senses, and leverage the true spirit of a destination. We really want to over-program a resort to create a sense of awe and wonder again.”
CORRECTION: The article has been fixed to say Omni plans $1.5 billion in capex, not $5 billion.