All hoteliers go through ups and downs in the business, particularly during economic downturns. But for a hotel company to launch new brands, survive and grow during the span of this century’s most significant downturns takes hard work and a strong commitment to its guiding principles. That’s what Doyle Graham Jr. and his team at Valencia Group have done since the early 2000s when the first Hotel Valencia opened at San Antonio’s Riverwalk. Today the company has two Hotel Valencia properties, two Hotel Sorella properties and the newly opened Lone Star Court in its independent portfolio. It’s not a huge collection, but it’s exactly where Graham wants to be in terms of creating successful properties in the right markets for the right guests, while building loyalty for the company’s hotels.
Graham’s story is that of a banker-turned-hotelier, though his interest in the appeal of independent inns started at a young age. “My father worked in the hospitality industry … for a large hotel company which, although it was large, operated all independent hotels—the grande dame-types of hotels that were very iconic,” he said.
That interest in the appeal of independent hotels would come into play later on when Graham started Valencia Group, but his first career was in banking. The commercial and merchant banker got the opportunity to develop some Hilton-affiliated brands in Texas in the 1990s “I was approaching hotel development from the financial perspective at that time, and I got more and more involved. That’s really what led me to develop the idea for Valencia and the first hotel,” he said.
He said timing had a lot to do with his thoughts on how standardized branded hotel development had become at the time. He knew that when he had the opportunity to build a hotel, it would be done in a different way. “At the time when I dealt with nationally franchised hotels, I found it was a pretty stifling process creatively. I would think back about the hotels where my father worked, and I really felt like the creative process in developing the memorable experiences that these properties had, had been lost,” he said.
His plan was to build an independent, luxury, lifestyle-minded hotel in a good location. He found that location along San Antonio’s bustling River Walk. “We developed Valencia on the premise that if you went to a great location and developed a high-quality, memorable luxury hotel that created an experience, then that hotel could stand out as an independent and compete head-on with the brands.”
During the three-year development period that began in 2000 for Hotel Valencia Riverwalk, Graham was still developing some franchised properties in Texas, including a 16-story Hampton Inn in Austin. Then a few months into the development of the San Antonio property, an opportunity came along that Graham just couldn’t pass up.
Graham’s company had worked with real estate investment trust Federal Realty Investment Trust to purchase the land for the Riverwalk property. About six months into that development, Federal Realty approached Graham to develop a similar hotel at a high-profile mixed-use development they were doing in San Jose, Calif., called Santana Row. “It was the type of opportunity any hotel developer would love to have, but our only hesitation was the size of our company,” Graham said. “We were so busy and we just added more on top of that.”
So the company jumped at the chance and ended up opening both the 213-room Hotel Valencia Riverwalk and the 215-room Hotel Valencia Santana Row in 2003.
Yes, 2003. Both new-build hotels went in the ground and opened during the tumult of a post-9/11 economy. What did this mean for Graham, who had built his company on the concept that strong markets are what make strong hotels?
“We just had to work through it,” he said. “Fortunately, San Antonio was a market with a lot of group business booked well in advance, so it wasn’t severely affected. San Jose, being in Silicon Valley, was another story altogether. That market was greatly affected and we were cautiously optimistic about how our hotel would perform”
Graham said the Hotel Valencia Santana Row was the top-performing hotel in San Jose from a revenue per available room standpoint within six months of opening. “We were making money, so we were able to ride it out. That market has recovered, and to this day it’s doing very well.”
For the next few years, Graham and Valencia Group managed its two Valencia properties while looking at any additional opportunities that came their way, from conversions to ground-up development. “We realized we just couldn’t create the kind of value in an acquisition that we were accustomed to creating with ground-up development, so we backed off,” he said.
When financing started to return, Graham got a new development opportunity, this time in the thriving Houston energy corridor. Real estate developer Midway was building a mixed-use development called Citycentre.
At this point, Graham and his team weighed their options. “Midway had seen our Valencia hotels and felt that they were exactly the kind of product they needed for their project in Houston,” he said. “So we looked closely at their development, the demographics of the guests visiting and we really evaluated the situation. Was Valencia, as we knew the brand at the time, the right product for this new development, which had a different flavor than what we had built at the other properties?”
So in a move that characterizes Valencia Group’s attention to detail when it comes to branding, the company built a revised concept for the Houston project, which would become the Sorella brand of hotels (Sorella means “sister” in Italian). “Sorella has a different look and feel,” Graham explained. “It’s what we refer to in-house as a modern or contemporary Italian flavor.”
The 266-room Hotel Sorella Citycentre opened in 2009—yes, right in the middle of the decade’s next recession.
“We were prepared though; we had done our homework and had created something unique in the comp set of that market,” Graham said. “So similarly to what we saw in 2003 in San Jose, this hotel gained market share quickly. Within a surprisingly short time period we were rate leader and occupancy leader in the market.”
A BUSY 2013
The next opportunity for a Sorella came in the Plaza Vista mixed-use development in Kansas City, Mo.’s, Country Club Plaza. For this project, the company developed within the shell of a former hotel on the site that had never been completed. The Hotel Sorella Country Club Plaza opened in November 2013, further solidifying the company’s plans to build within strong mixed-use development projects.
At the same time, in 2009, the company found another opportunity, this time in a totally different type of development but in a very strong market—Austin, Texas.
“Austin in 2009 was doing well despite the recession and we had the chance to develop within a mixed-use area, which we like [The Domain in Austin], so we ran the feasibility analysis though we weren’t entirely sure what to develop on the property,” he said.
Graham and his team started rehashing some old ideas that had come up on their drawing boards before, when they had discussed how fun it would be to redevelop an old motor court-type property so typical of the area.
“Everything lined up for this development,” he said of the Lone Star Court, which opened in December. “Austin has a very distinct culture and it has a lot of out-of-the-box thinkers in it, so we thought this would be our great opportunity to develop one of the motor court-type hotels like we had discussed, but as a new-build.”
All five of the company’s independent properties has won numerous awards from the likes of TripAdvisor, Conde Nast Traveler and even the Michelin guide.
Graham credits each property’s success to the strength of the markets each hotel is in and to his team, particularly EVP of Operations Roy Kretschmer. “We’re in good markets, we do our homework everywhere we go, and we have an outstanding culture, from the corporate office through each property,” he said.
As for future brand expansion, Graham said he and his team are always looking, primarily for ground-up development. “I envision a handful more of each Valencia and Sorella hotels,” he said. “We’re extremely discriminating, though, about where we place that next flag—it has to be the right property at the right location and in the right market.”
One thing you won’t see Valencia Group properties doing, though, is affiliating with soft brands. “We wouldn’t consider that for our hotels,” Graham said. “We are who we are and it’s our unique DNA that makes us different. That’s a good thing—even among the other independent hotel companies.”
Real estate developers as artistic visionaries?
Valencia Group president and CEO Doyle Graham Jr. built his career in merchant banking and invested in hotels long before he started building his own. So how do a crew of banker-types develop independent brands like Valencia, Sorella and Lone Star Court? It’s all about having a strong vision from the start and working with outstanding partners, Graham said.
“I felt from the beginning there was an opportunity to create some very exciting, memorable and unique independent hotels,” he said. “Some of our hotels have a more fun feel; others are more luxurious, but they all tap into that great experience. That’s the key component that has made each of our hotels so successful.”
When the company was developing its Valencia and Sorella brands, it constantly considered the markets and demographics of the target locations. “First we typically define the size of the hotel, how much meeting space it needs, who the travelers will be, what sort of F&B concepts they want,” he said. “Everyone is involved, including sales and marketing and operations, then we work with design consultants and so on.”
The company has its own loyalty program, Valencia VIP, which rewards guests with upgrades and benefits, and also with some different rewards, like gift certificates awarded on each fifth arrival, and and annual birthday present.
Graham said website-direct bookings drive a large part of the company’s business, and he credits the corporate and property-level sales and marketing staff with going after the specific guest mix that works best in each market.
AT A GLANCE
Structure: Ownership, development, management
Portfolio: Six hotels, 1,095 guestrooms