Loews Hotels reaches back in order to move forward

The Tisch name carries prodigious weight in New York. As a co-owner of the New York Giants, this weight can be either heavy or light, depending on how well or woeful Big Blue is playing. 

Beyond the gridiron, the Tisch family owns a sprawling conglomerate with stakes in many types of businesses, none more prominent than Loews Hotels, which owns and/or operates 24 hotels in the U.S. and Canada and whose roots stretch back to the 1950s, when Robert Tisch and his brother, Laurence, began investing and developing hotels.

Robert's son, Jonathan Tisch, today is the chairman and CEO of what is now Loews Hotels & Co., a hospitality company with Loews Hotels representing its consumer brand. Loews also has partnerships with Universal Orlando, what it calls its Immersive Destinations brand category, and recently forged a new development partnership with global real estate developer The Cordish Companies. The venture currently is developing Live! by Loews, in Arlington, Texas, a $150-million flagship hotel that will be part of Texas Live!, a $4-billion mixed-use development for the Arlington Entertainment District, which includes the Texas Rangers' new $1-billion ballpark. The Rangers and the City of Arlington are also part of the partnership.

The hotel will sandwiched next to AT&T Stadium, home of the Dallas Cowboys, the house that Tisch's friend, though rival, Jerry Jones built. "I have spoken to Jerry about the deal and he's thrilled that we're going to be neighbors," Tisch said when we visited with him at the 39th annual NYU International Hospitality Industry Investment Conference, of which Tisch is also the conference chair.

Back to Basics

Live! by Loews is a new era and opportunity for Loews, which continues to evolve, but is now, once again, under the steadfast eye of Jonathan Tisch, after prior CEO Kirk Kinsell left the company last October citing personal reasons. Instead of hiring a new CEO, Tisch took back the reins (he had been Loews Hotels CEO from 1989 to 2012, before ceding the role to Paul Whetsell, who was then succeeded by Kinsell), and under his guidance, Loews abandoned plans for a soft brand called OE Collection, and rethought the idea of expanding the Regency brand, which is affixed to its New York property, similar to how Hilton took the Waldorf Astoria name and extended it to other hotels. "We course corrected," Tisch explained, conceding that the OE Collection would have difficult footing because of how crowded the space already is.

In recasting Loews, Tisch is reaching back to the company's foundation. "Loews Hotels is going back to its early roots," Tisch said. "It has always been very focused on groups, whether it's corporate or associations. It's something that we've been doing for decades now and it's the business that I learned from my father."

Tisch then cites such newer properties as the 1,000-room Loews Sapphire Falls at Universal Orlando, which opened around a year ago. The hotel is connected through the meeting space to the equally large Loews Royal Pacific Resort. "Put them together and you have 2000 rooms and 275,000 square feet of meeting space," Tisch said. "So the Loews box goes after that group business—and that's the business that we've been in for years and a business that I understand."

To be sure, Loews has breadth in Orlando, boasting some 6,200 total rooms over six hotels in an assuredly group-business town. And while group business and large corporate events took a nosedive during the Global Recession, subsequent AIG Effect and inflammatory remarks made by President Obama about corporate boondoggles, it's clawed its way back, according to Tisch. "I think U.S. companies are feeling good about themselves, earnings continue to be fairly robust, you have nonexistent interest rates and you have gas prices that are under $3. So group business is strong," he said.

The move to focus on Loews' strengths and jettison those strategies outside its core will help crystallize Loews where it counts: in the headspace of consumers. "We did a lot of soul searching about what it is we are really good at," said Oliver Bonke, who at the time of our conversation was Loews Hotels' chief commercial officer, but has since been named president and COO of Shangri-La Hotels & Resorts. "What we walked away with is the clarity that Loews Hotels as a consumer brand has a huge amount of equity in consumers' minds in terms of the quality product we have, the somewhat elasticity that this brand has. It's because of that kind of service product and ambience that we stepped back and said, 'OE?' A lot of other people are out there playing the distribution game, but you can't just stick a bunch of flags into the ground and supercharge a loyalty program. Because Loews Hotels as a consumer brand comfortably leans into luxury, we really didn't feel the need to say, 'Well, let's layer luxury on top of it.'"

Bonke was referring to why Loews decided to shelve both its OE Collection brand and extension of its Regency brand, both of which were announced in 2014 and 2015, respectively. 

Under Tisch's watch, don't expect Loews to again come out with any new brands or explore new segments. While most other hotel companies have launched products that play in the select-service, midscale space, cost-friendly to developers and appreciated by consumers for amenities like complimentary breakfast, Loews is not interested, Tisch made adamantly clear. "It's not what we do; it's not who we are," he said.

Road Forward

If anyone understands the direction the wind is blowing in the hotel industry it's Tisch. The of sprawl of online travel agencies continues to rankle some hoteliers who see them as raiders, lopping off a piece of revenue while not sharing in the sweat or risk of owning and operating hotels. Nonetheless, curbing their presence is not likely; it is something Tisch accepts. "OTAs aren't going anywhere; we understand that and we try to use them," Tisch said.

But it depends on the property and business. Consider the Loews Regency New York, which is a highly transient hotel, tougher to fill on weekends and, as Tisch acknowledges, resides in a city on the verge of being overbuilt. "There, we need the OTAs," he said. 

OTAs also become more prevalent in a city like New York because it's not just Manhattan anymore that's the only game in town. Travelers are as eager to stay in hotels in Queens, Brooklyn, The Bronx, Staten Island—and on top of that are becoming more comfortable using accommodations provided through home-sharing sites like Airbnb. "The tourism infrastructure now takes place in all five boroughs," Tisch, ever a New York advocate said without complaint. "That's the good news because it spreads our industry and creates more jobs. But you look at weekends now in New York, it's hard; there's more competition."

On the other hand, Loews' Orlando properties don't need as much OTA succor on the basis of Loews' relationship with Universal. "We generate so much business in our partnership with them that [OTAs] become less important," Tisch said.

There is no ambiguity on the impact OTAs have on the bottom line. "You look at your cost structure now, it's an additional expense that we didn't factor [in the past] in such a large way," Tisch said. "But your distribution costs are now a very big part of your cost structure and that's because of the way you remit to the OTAs."

Loews is lucky in that it has exposure in many of the U.S.'s gateway markets, but it still has to stay vigilant of factors that will impact its business—like overbuilding and other variables outside its immediate control; for example, Zika, which still has not been 100-percent eradicated and does impede travel to South Florida and Miami, where Loews has a 790-room hotel. According to CBRE predictions for 2017, Miami will have a 5.1-percent uptick in new hotel supply coupled with a forecasted 5.5-percent decline in RevPAR. Not auspicious numbers.

Tisch called these types of obstacles factors for why the company continues to reinvest in its properties. "That's why we just spent $50 million renovating the [Miami] hotel," Tisch said, a renovation that wrapped about two months ago and "touched every inch of the hotel." Tisch said the renovation is already helping and he expects a bump in ADR from it. "It's paying off in terms of the response we're seeing—business is good down there. I think it was a very prudent move," he said. 

Words Matter

Beyond his own hotels, Jonathan Tisch is passionate about travel on the global scale. He champions the rhetoric of those like former U.S. Secretary of State Colin Powell, who promulgated the idea of secure borders but open doors. He is not, obviously, in agreement with President Trump's up-to-now thwarted attempts for a travel ban and other moves, such as defunding Brand USA, the agency focused on attracting international tourists.

"My concern is that words matter and that rhetoric can become gospel," Tisch said. "We live in an era right now where there are so many new travelers, and they're going to go to a place where they feel welcome. The middle class is expanding around the world, they have access to capital, and they're not going to come if they don't feel like they're welcome. It's the last thing we want. The rhetoric is so negative that it is going to potentially hurt all the gains that we've made."