A lifetime of experience and relationships at Wyndham and beyond helped Sonesta’s franchise leader put together the deal of a lifetime
We’ve all lived through it: March 2020, when the hospitality industry hit rock bottom. Keith Pierce, EVP and president of franchise and development at Sonesta International Hotels Corp., lived through this reality as well, but he also lived a tandem reality, one that was just gearing up and that would transform Sonesta into one of the largest hotel companies in the United States.
To set the stage: “In the fourth quarter of 2019, prepandemic, the Red Lion Hotel Co. had met with some challenges,” Pierce said. “There were some executive decisions that were made, there was a visceral reaction to those decisions from the franchisee base, and they started to leave in large numbers. They missed their quarterly earnings and as a result, they wiped out 66 percent of the
market cap and made a change at the CEO level.”
At the time, Pierce was president and managing partner at The Passionality Group, an advisory and consulting group, after a 27-year career at Wyndham Hotel Group/ Cendant Corp. Red Lion’s board reached out to him about taking over the company, which at this point was a pure franchise company with 900 hotels in eight brands.
“I went out to Denver in Q4 of 2019. I put a strategic plan in place in front of the board and then they asked me to come back … for a second round of discussion. I did and as I was getting on the plane flying back, this thing called COVID hit. No one knew what it was … so the search was timed out because the world was trying to figure out what the heck COVID is.”
Pierce went back to his home office, the hospitality industry was stalled, but he couldn’t stop thinking about RLH.
“The opportunity really was to buy the company to take it private and to fix some of the wrongs of the past, which were all very repairable,” he said. “So I put together an investment thesis with our group of individuals that I met through [Passionality] in Miami, investment bankers. We put together a strategy to basically do a [general partner limited partner] type structure where we would go raise $95 million to buy the company and take it private. And then I would go to Denver and fix the mistakes and grow the business.”
But then the money fell through, which brought a new player into the deal. John Murray, who at the time was managing trustee, president and CEO of Service Properties Trust, which owns a 34 percent interest in Sonesta, was converting a number of Marriott International and IHG Hotels & Resorts properties into Sonesta hotels. Murray and Pierce, who knew each other from their Wyndham days, reconnected.
“I brought him what I thought was a great opportunity here and it was really built on a couple ideas: one, we could buy a franchise platform very quickly and get Sonesta franchising up and running,” he said. “Two, we can bring scale to the table, which again, I go back to my Wyndham days and I watched what Wyndham was able to do when they scaled up the organization and how they ended up really using it to their advantage.”
PICKING UP SKILLS
Pierce’s father was the long-time publisher of Lodging Hospitality magazine, and Pierce’s experience in high school with “shaking a lot of hands and great dinners and great parties” inspired him to study hospitality administration/management at Florida International University. He worked internships at New York City hotels then started at the Waldorf-Astoria New York after graduation.
“I moved from Long Island in 1986 to go kick off Hawthorn Suites with Joe McInerney,” Pierce said. “Now when I say I went up to go help them kick it off, what I did is I went in the mailroom.” Before digital franchise disclosure documents, this is where all the FDDs were housed and mailed. “That was kind of my entry into corporate and it just so happened to be in franchising and it’s really where I’ve built my skill and refined my experience.”
Next Pierce moved to Ramada and Rodeway Inn, and Hospitality Franchise Systems (later Wyndham) purchased Ramada.
“By the time I left, I was running the Americas. So over 6,000 hotels and 12 brands in a 27-year run,” he said. “There were a lot of stops along the way. Brand marketing, brand leadership, brand president, president of the Americas, executive president, it just kept on building. It was an amazing experience to have basically a courtside, front-row seat on the growth of one of the largest hotel companies in the world over the course of 27 years.”
WINNING FORMULA
According to Pierce, this is still early innings for Sonesta.
“It’s already proved to be successful. We opened 74 hotels our first full franchising year across the whole portfolio, almost 9,000 hotel rooms, and for a small group like this group, that’s pretty remarkable,” he said. “We’re just under 1,200 hotels, just in the U.S. alone. We could do 6,000 hotels [in the U.S.]—forget rest of the world. There’s a real long runway here for this organization.
“I suspect that it’ll probably be my last stop but that’s fine because it’s a great group. It’s a great company with great brands and we can grow the company globally. What I would love is to finish up in a place where the organization is on solid ground and all the people that came for the ride are on really solid ground.”
SOURCE: https://hotelmanagement.mydigitalpublication.com/march-2023?m=18433&i=785046&p=40&ver=html5
