Usually when someone throws a ball, it’s expected there’ll be someone else there to catch it. Luckily for Stewart W. Bainum Sr., when he decided to pitch the leadership of his company, which included Choice Hotels, to his son, not only was Bainum Jr. able to snag the ball, he was more than eager to run with it. And he was, as they say, a natural.
When Stewart W. Bainum Jr. became chairman/CEO in 1987 of his father’s Manor Care nursing home company, he already had been working in the family business for some 15 years and had been instrumental in the acquisition in 1980 of Quality Inns, which helped create the foundation of today’s Choice Hotels International. Back then, Bainum Jr.’s hotel bailiwick in the United States consisted of 290 hotels under one brand. Over the past 32 years, Choice has grown to a multibrand global franchisor with some 7,000 hotels in more than 40 countries and territories.
Like the Marriotts and Hiltons, the Bainum family influence in the hotel universe stretches back to the past century, but unlike its megachain competitors there is nary a Bainum hotel to be found. Flying under lodging’s radar apparently is fine for Bainum Jr., although his contributions to the industry were in the limelight this past winter as he received the Lifetime Achievement Award at the Americas Lodging Investment Summit. The honor also tandemed with the kick-off of Choice Hotels’ 80th anniversary year.
In an exclusive interview with Hotel Management, Choice’s chairman traced his multidecade journey in hospitality, praising both his personal family and hotel family for their guidance along the way.
The Bainums weren’t always in hospitality, however.
‘”My dad started a plumbing company [in Washington, D.C.] just after the war in 1946 when he was about 27 years old and my mother was his administrative assistant. They worked out of their apartment and I was born in that apartment in the basement of a house that they had bought where they rented the upstairs,” said Bainum, noting it was an entrepreneurial tactic his father implemented to supplement his plumbing-business income. “He drove a taxi, too,” he recalled. “He had some good stories and most of them, I think, were true.”
Fast forward a decade and by 1957 Bainum Sr. is able to open his first hotel (26 rooms) in Silver Spring, Md. [and later the former headquarters city of Choice Hotels, now based in Rockville, Md.]
A New Tactic
Bainum Sr. did not have the capital to install a swimming pool and so it was hard to get into the nascent, seven-member Quality Courts United cooperative system of hotels, said the chairman, so his father spent a year traveling up and down the Eastern Seaboard lobbying the members of the association to gain admission into the small chain. “He became quite vocal and an active member of the cooperative. He ended up being on the board, he ended up being chairman of the executive committee of the board and then persuaded them to become a for-profit entity. He felt it would change the culture and allow the system to grow and that would help everybody because there’d be more hotels in the system. He prevailed in that,” said Bainum Jr.
That was in the early 1960s, and according to the younger Bainum, who was in college at the time, the shift “didn’t work so well.”
Based in Daytona Beach, Fla., the organization had a $4 million initial public offering when it transitioned to a for-profit entity, becoming Quality Courts Motels, but according to Bainum Jr., “They weren’t running the business the way it should be run.”
At the end of 1967, Bainum Sr., who had four hotels by this point operating under the name Park Consolidated, proposed merging his assets with the small public company. “And there was a proxy fight. I went to the shareholders meeting where the proxy fight came to a head,” said the chairman. His father won out, became president/CEO and moved the company to his Silver Spring stomping grounds near Washington, D.C., because he felt the culture wasn’t going to change if it stayed in Daytona Beach.
“It was pivotal,” said Bainum Jr.
A Distinct Influence
So was his father’s influence. In terms of pursuing a career in college, the executive recalled, “Dad always pressured me to major in business. I took a couple of business courses in my first year in college and I was bored stiff. I was a history major with liberal arts.”
Come sophomore year, though, he was elected president of the student body for his junior year and, said Bainum Jr., “I kind of liked being in charge and I kind of decided maybe business school wasn’t such a bad idea. I didn’t tell my Dad, though; I didn’t want to get his hopes up. I didn’t want pressure and I think he’d given up on me by then. So I applied to business school and ended up getting in. After that I came into the family business in time.”
It was 1972 when the executive came on board at Manor Care. Quality Courts Motels that year changed its name to Quality Inns International to reflect its growing global presence, having expanded into markets such as Belgium, Canada, Germany, Mexico and New Zealand. Two years later, the country was in the grips of an economic crisis and gas shortage. The executive recalled the bleakness that later became brighter—much brighter. “Long-term assets we were financing with short-term money; the left side of our balance sheet was like a pyramid ... we were in default on the bank loans. It was during that period that we started saying, ‘Look, if we can get our ass out of this thing, we want to focus on franchising because the margins are pretty good; it’s not capital intensive," he said.
Forward with Franchising, Segmentation
The company sold off some 45 hotels in order to solve the problems with the banks, ultimately paring the portfolio to nine hotels. “We just focused on franchising from then on,” said the chairman, who became directly involved with the hotel division in 1976.
In 1980, Quality Inns International merged with Manor Care. Amid all this, Bainum Jr. saw the opportunity segmentation would bring and in 1981, created and launched the midscale Comfort Inn brand as an adjunct to the existing Quality Inn and Quality Royale brands.
Over the next decade, the company would transform the Royales into Clarions and add Sleep Inn (originally dubbed McSleep Inn before hamburger giant McDonald’s pulled Quality into court), Comfort Suites, Econo Lodge and Rodeway Inn. It also changed its name to Choice Hotels International (The chairman said there was never any consideration of naming the chain Bainum Hotels.)
Manor Care owned Choice for 16 years. “The great synergy there was the ability to move capital back and forth. When one industry was undervalued and maybe the other industry was overvalued or valued properly you could shift the capital to invest at a time when you could buy assets cheap,” said Bainum Jr.
Manor Care sold all the (nine) hotels when it completed the merger.
By 1996, the company launched MainStay Suites, one of the first midscale extended-stay brands. Choice Hotels also was spun off from Manor Care and became a publicly traded company (CHH) on the New York Stock Exchange.
Putting the Spotlight on Others
While the driving force behind the international hotel company, Bainum Jr. for the most part has remained outside the scope of the industry’s magnifying lens, preferring to cite the accomplishments of the company’s past CEOs, including Robert Hazard Jr., Charles Ledsinger, Steve Joyce and the current CEO, Patrick Pacious.
“We do what we say. We have leaders ... who are consistent. They don’t say things that they can’t deliver and that’s why 99 percent of our franchisees, when their contracts are up, are asking if they can stay with us,” said the chairman. “The culture has changed over time; we’re still a work in progress so that we’re more sensitive to the franchisees and their needs. These are small business owners who have worked their asses off to build up enough capital to create a business for their families. We are very respectful of that hard work.”
Bainum Jr. is no slacker himself. In addition to Choice Hotels and Manor Care he has led other organizations, including Vitalink Pharmacy Services and Sunburst Hospitality. He also served eight years as a delegate and senator in the Maryland General Assembly. And in addition to the recent ALIS award, he has been recognized by the NAACP, Maryland Common Cause and the Maryland League of Conservation Voters, among others.
Self-effacing, he considered the ALIS award “more a testament to all the people over the years—our people—and all the hard and smart work they did for many years and are doing to this day.”
The executive also is involved with his siblings in the Bainum Family Foundation, established in 1968 by Bainum Sr. to support educational programs and projects assisting underserved children and youth, from early childhood through post-secondary education, primarily in the Washington, D.C., and Baltimore metropolitan areas.
Giving back is a part of the Bainum philosophy that threads through Choice Hotels. “One of the things that’s important to us as stakeholders in the company is our customers, the people serving our customers and owners and also, the communities we serve. We have an investment in those communities and we need to be active citizens and we have the wherewithal to help them out. It’s really important,” said Bainum Jr.
“I was born on second base; my dad had a business and he taught me the business as we went. And I was lucky.”