For the past five years, Robert Rauch, founder, chairman and CEO of RAR Hospitality, and Cameron Lamming, president and CDO, have been pushing the hotel management company toward a leadership position in the American West, largely in California, with a smattering of properties in Arizona and Colorado.
The San Diego-based company, whose properties achieved $81 million in revenue in 2017, has grown to 16 hotels (representing some 1,800 rooms), both branded and independent, and has four more under development, including a foray into the Midwest with a Chicago project.
Rauch, a seasoned industry veteran with more years in the business (40-plus) than Lamming is old (he’s 29), originated RAR in 1990, then segued the company to third-party management in 2011.
The company manages and develops a variety of limited- and full-service properties and has ownership in seven hotels.
“Of the ones that we own, it’s kind of a mixture. Sometimes it’s sliver [equity], sometimes we’re full-on partners, sometimes we’re co-developers,” said Lamming. “We like to keep a ratio of about a third owned and two-thirds managed.”
The CDO indicated the company is “brand agnostic,” although it counts in its portfolio such known names as Best Western, Best Western Plus, Doubletree by Hilton, Fairfield Inn & Suites, Four Points by Sheraton, Holiday Inn Express, Homewood Suites, Quality Inn & Suites and Ramada.
“We also have a number of boutiques in our portfolio; we do boutiques very well,” said Lamming. In California, these include Carlsbad by the Sea Resort in Carlsbad, El Cordova Hotel in Coronado, Rio Del Sol Inn in Needles, and The Keating and The Lafayette Hotel, Swim Club & Bungalows, both in San Diego.
“We take the learnings from [the boutiques] and apply it to essentially every hotel within our portfolio, including the level of creativity that comes with it,” said Lamming.
Wrangling Risk
In terms of West Coast development, in California RAR Hospitality currently is building a traditional Fairfield Inn & Suites in Oceanside as well as two emerging brands: a Tapestry by Hilton in San Diego—a first for the city—and a Tru by Hilton in Inglewood.
“We like to look at the newer brands as they come online; we’re not afraid to try those out,” said Lamming. He noted that while some might characterize emerging brands as risky, most have a strong upside. “They’re untested but they’re within the right family. And that’s a good thing,” he said.
Rauch noted RAR Hospitality also isn’t shy of testing some “emerging” markets.
“We built a Fairfield Inn & Suites by Marriott across from the California State University at San Marcos,” said the CEO. “That is a tertiary market; a distant suburb from San Diego. But we felt the fact that there is a university within the California system that was going to be the fastest-growing university…that that was a low risk. There was no depth to that market. It was all California State University—that was the depth.”
The property has thrived over the past 18 months and Rauch feels it has a competitive edge, with no other developers (at press time) in the rear-view mirror.
The Fairfield Inn also has a unique offering, which both executives touted as a game-changer.
“We opened with a service robot,” said Rauch, commenting on the Savioke-designed technology known at the hotel as Hubert, the Relay robot.
“The only people who don’t like the robots are labor unions; however, the robots don’t replace people, they add a service. If I have a front-desk agent and a guest asks for something, that agent can’t leave the front desk to deliver something. So, they have to find a housekeeper or bell staff or maintenance person [who may not be available]. I’d rather have a robot. The guests are actually asking for the robot because it’s so much fun,” said the chairman.
Rauch explained the robot calls the elevator via WiFi, travels to the guestroom, calling the room to alert the guest the delivery is ready.. ”He shows up with a little note that says ‘Push here,’ and you get your beer or Gatorade or water or your food, towels, pillows—anything that fits in the three-foot-high robot,” said Rauch. “It’s got a big belly so there’s plenty of room. And no tip required The guests love it.”
At this point, Hubert can’t do multiple deliveries but the CEO noted, “Of 116 rooms we have never been so busy that the robot can’t get every delivery done within 15 minutes” and averages one delivery in a five-minute period.
“The robot is an example of the way we approach hotels; trying to pioneer guest service, trying to push the limits on creating an experience for our guests. You need to innovate in order to compete, and not just against your peers in the hotel industry, but with the shared economy,” said Lamming. “Hotels didn’t have competition since forever; you either stayed at a hotel or you stayed at a friend’s/relative’s house. Now you’ve got competition. Time to start innovating. We started long ago.”
Comfort Zone
In terms of expansion, Lamming indicated the West Coast is largely home base.
“We like to stay on the West Coast for developments. We know every submarket west of Texas and we know what works and what doesn’t work. We can expand as fast as we want; it’s more about expanding with the right people,” he said.
“The barriers to entry in San Diego—or anywhere in California, particularly on the coast—are significant, so we feel protected,” added Rauch.
Lamming said RAR also is not afraid to build, even as construction costs escalate and logistics become difficult.
“We are only building right now in places where there’s extra demand drivers. For example, we’re building [the Tru] in Inglewood near the new football stadium. The market is strong right now without the stadium. If the market softens, we have an added stadium, so we should still be above where we were when we started construction,” said Lamming.
“I think the cost of construction is such that you really need to understand return on investment,” said Rauch. “Cameron and I know that we’re not going to hit the internal rates of return that developers, including ourselves, hit in the past. So, we have to measure the risk: Is the reward strong enough to take that construction risk? We’re developing three hotels in Southern California right now and we would develop elsewhere but you’ve got to develop cautiously. If you can buy something and renovate less expensively than build, you need to look at that. We look at each market separately.”
Observed Lamming: “Things we’re working on pencil well.”