Marcus Hotels navigates new course, looks to the outside for growth

AC Hotel Chicago Downtown is owned and managed by Marcus Hotels. “It’s very European,” said Marcus President Joseph Khairallah. (The AC Hotel Chicago)

Marcus Hotels & Resorts is hard at work being more visible. That’s not to say the Milwaukee-based company, which currently owns and/or manages 18 hotels, has been an introvert; rather, it’s refocusing its efforts to be more open to potential partnerships with other investors, owners and asset-management companies.

This refinement has been a top-down effort ever since Andrea Foster, Marcus’ SVP of development, joined the company a little more than a year ago and Joseph Khairallah was promoted from COO to president in October. In other words, it’s all about getting the word out that Marcus is looking to grow. But it will take some smart marketing.

“We have a long history of success, [but] people didn’t see us as outwardly focused, looking to deal with other partners,” Foster said. “The industry saw us as internally focused, so we have employed a strategy focusing on marketing ourselves to the industry both as a management company and sliver investor/joint-venture partner.”

To that end, Marcus sees opportunity in three main asset types: branded full-service, urban, select-service; and boutique properties. Foster clarifies that interest is in higher-key-count boutiques, such as The Garland, a Marcus-managed hotel in North Hollywood, Calif., with 250-plus rooms.

A rendering of the Omaha Marriott Downtown at the Capitol District, which is slated to open at the end of 2017. Marcus Hotels has sliver equity in the project, in partnership with Shamrock Development.

Out of the Middle

Aside from The Garland, an independent hotel in Nevada and a Westin in Georgia, Marcus’ portfolio, which also includes an AC by Marriott hotel in Chicago, skews to the center of the U.S., something Khairallah is not shy to shift from. “We are looking to prove our worth outside the Midwest,” he said, “and pursuing many opportunities on the coast,” such as Washington, D.C. “Our strategy is to be a national leading management company, and when you say national you have to get out there.”

Regardless of geography, Marcus fashions itself as an expert in one particular kind of asset, Khairallah said: full-service, between 200 and 250 rooms. “That’s our sweet spot,” he said, though noting that Marcus is also pivoting toward select-service properties, which are leaner operationally than their full-service counterparts.

This is not something lost on Khairallah, who understands the avidity toward the select-service model and, moreover, lifestyle hotels. “You hear about everyone moving to boutique now and select service. Developing a full-service box is not the norm these days,” he said.

In order to attain more management contracts, Marcus is trumpeting its turnaround success. Khairallah cited The Westin Atlanta Perimeter North, which Marcus, once it took over management, repositioned by thinking like a customer. “You take a full-service hotel like this; you repurpose the restaurant,  you program it in a different way,” he said. For example, food-and-beverage was uneven, with the bar at one level and the restaurant located on another. “We moved things around; we looked at it from a customer perspective and asked, ‘What are they looking for as far as the experience?’” Khairallah said.

The lobby of The Garland, in North Hollywood, Calif. The property is one of seven independent hotels in Marcus’ portfolio.

Portfolio Diversity

One of Marcus’ biggest strengths, and something it uses to court new business, is the diversity of its portfolio. While it might be slanted toward Middle America, it consists of branded hotels, independent hotels, convention center hotels, select-service hotels and resorts.

The distinction is something Khairallah, who spent three decades with Hyatt Hotels Corporation, recognizes: Operating branded hotels versus non-branded hotels offers different opportunities. For instance, “Running an independent hotel is a lot of fun because you can do some things that you can’t do sometimes with a branded hotel,” he said. At The Pfister Hotel in Milwaukee, Marcus installed an artist-in-residence program that Khairallah said has “endeared the hotel to the community.”

It was an idea that Marcus pulled into some of its other branded hotels, too, such as The Lincoln Marriott Cornhusker Hotel, in Lincoln, Neb., and The Skirvin Hilton in Oklahoma City. “I don’t think the brands mind. My experience is this: These are our standards. If you want to exceed them, go right ahead,” Khairallah said.

Though geographic diversification could be in the future for Marcus, its next project will be in Omaha, Neb., where it and Shamrock Development are building the 333-room Omaha Marriott Downtown at the Capitol District, anticipated to open in late 2017. It will be the anchor of a new planned community that will also include residential, office and retail space.