4 questions for Valencia Group's John Keeling

Houston-based Valencia Group is quietly building its collection of boutique hotels throughout Texas. This fall, the company will open the 223-room luxury Hotel Alessandra in downtown Houston. Last fall, the company debuted its second court concept hotel in College Station, Texas, where the 141-room Calvary Court anchors the 60-acre mixed-use development Century Square. The company has five additional properties open. Here, EVP John Keeling tells HOTEL MANAGEMENT why Texas is still hot for hotel development and where Valencia Group is headed in the future.

How has the talk of building a border wall affected your Texas business?

Mexico is not a major demand generator for us. The only property that has significant Mexico business is our San Antonio property, and it hasn’t felt any real downturn there. We have met with the head of Houston tourism to discuss how the talk of the wall and the overall attitude toward Mexico is making Mexicans fell less welcome in the U.S. and more reticent to come here. That’s already happening. In Houston, that most severely affects the properties around the Galleria and the Texas Medical Center because two of the primary reasons that Mexicans come to Houston are for shopping and healthcare. Hotels in the Energy Corridor don’t feel the impact and when our newest property, the Hotel Alessandra, opens in October, it will benefit from corporate demand downtown because of its proximity to the convention center. There could also be some demand from Mexican travelers, but it’s not a material part of our business.

What inspired the Valencia Group’s new “court” concept?

We felt we ought to be finding roadside motels and converting them to cool, hip boutique properties. But most of these properties were located on old U.S. highways, bypassed by interstates and in poor parts of town. The rooms were small, the ceilings low and the bathrooms tiny. The bones of these old motels were not consistent with the expectations of our customers. We felt we needed to build a product with large rooms, high ceilings and great bathrooms. We also looked at the motor-court model that was U-shaped with cars parked in front of guestrooms and, since we wanted to put rocking chairs in front of the rooms and we didn’t want guests looking at the bumper of a car, we moved the parking lot outside and closed the circle.

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So our court hotels are upper-upscale, full-service properties that take their DNA from the motor courts of Route 66, but the rooms are 390 square feet and creature comforts aren’t spared. It’s still like stepping back in time, though. We call the concept an adaptive reuse of historic buildings that don’t exist. People will come to our court hotels and ask if we’ve renovated an old building and we consider this to be a compliment.

The bulk of Valencia Group’s properties are located in Texas. Do you want to continue to grow in the state?

Part of our strategic plan is to own Texas and to have the best hotel in every market of consequence in the state. Our court concept is well suited to markets like Lubbock and College Station where we couldn’t afford to build our Sorella and Valencia products and yet, the court concept can still be the best hotel in the market. We want A locations and we want to be able to influence the design. We’re not planning to push the Hotel Alessandra concept as aggressively as our other concepts. Our guests are seeking an upper-upscale or luxury experience and they’re basing their booking decision on the anticipated experience of the hotel, not on price or reward points.

Is expansion outside of Texas a priority?

We’re not a public company and we don’t have funds that have an expiration date and so we are in no rush to build. We’re very picky. If you look at our brand standards, we only do A locations where you step out of the hotel and there are shops and entertainment right outside the door. Our guests don’t need a car when they stay with us. So far, every one of our hotels meets this criteria and our future hotels will, too. We’ve looked at hotels all over the country—in New York, Chicago, Miami, Nashville, Charleston, Savannah—to no avail.

We won’t overpay for a project because we want it to be profitable and if we can’t find the site that we want, we’ll pass on the market. We would like to be in gateway cities, but it’s not always favorable for us. But we do well in secondary and tertiary cities. Expanding our footprint across the country will primarily be opportunistic and in partnership with a local developer or as part of a joint venture. We like real estate and we like to own real estate and if we can’t own, we like to be an investor.