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Sonesta CEO Hopes To Grow Brand Recognition as REIT Connection Builds Owner Buy-In

Company Eyes Further Growth in Central, South America and the Caribbean

While he called it unrealistic to expect Sonesta International Hotels Corp. to catch up with the top five hotel companies, Sonesta President and CEO John Murray said he wants his brands to be thought of by guests as much as any other.

“That’s what I’m hoping for, that Sonesta will become well-enough known,” he said. “When people say, ‘I’m going to New York,’ you ask, ‘Where are you going to stay? Are you going to stay at the Marriott? The Hilton? The Sonesta? The Hyatt?’

“I want Sonesta to get that awareness that it’s thought of and mentioned in the same conversation. A year ago, it was a brand that nobody had heard of, so if we could get it to that same level recognition as the bigger brands and be known as a brand that’s a little more current, a little more flexible.”

That’s one goal Murray has just months after taking on the leadership role of the Sonesta hotel brand company after serving as managing trustee, president and CEO of real estate investment trust Service Properties Trust since 2018. Service Properties owns a 34% interest in Sonesta, and Murray led the effort to put that deal together in 2012.

The transition to Sonesta has gone well, given Murray’s familiarity with the brand company, he said in an interview. Murray had worked closely with Sonesta’s former CEO, Carlos Flores, and had a strong understanding of its operations and strategy. Still, he was nervous about the move initially.

“I’ve always been on the real estate side,” he said. “There’s a lot more people issues and a lot more customer focus and branding focus [at Sonesta], so that’s been a little bit of a learning curve, but we’ve got great operating people and great brand people, so they’ve got me up the learning curve pretty quickly.”

Looking ahead, Murray said Sonesta’s brands are well-positioned to capture all segments of demand, and that’s getting the attention of prospective franchisees. They’re also attracted to the fact that Sonesta isn’t too big, allowing for flexibility in contracts.

Because Service Properties has an ownership stake in Sonesta, any brand standard or property-improvement plan requirement is put on the REIT as well, he said.

“That alignment between SVC and Sonesta really resonates with Sonesta’s franchisees because they feel like that creates alignment for them as well,” he said.

Murray is still on the board of Service Properties, and his years with the REIT lend an ownership perspective to the brand’s leadership.

“I also have a sense of urgency that here’s what the owners need, and we need to get the performance there and the brand recognition there and rewards program there in a rapid fashion so that we’re meeting our owners’ needs, meeting our guests’ needs at the same time,” he said.

New Opportunities

With every hospitality downturn, there are lessons to learn and changes to make, said Brian Quinn, chief development officer at Sonesta, at the Hotel Opportunities Latin America conference. Leisure is clearly walking the hotel industry out of COVID-19 pressures, he said.

“If you’re going to recognize that leisure is such an important part of getting out of the pandemic and into the future, you have to have properties in destinations that are in demand that are tacked to that leisure traveler,” he said.

Looking at U.S. domestic and international travel patterns, Sonesta has seen great demand and interest in the Caribbean and Central America, particularly after entry requirements relaxed and vaccinations became available, Quinn said.

In the Caribbean, Sonesta has two all-inclusive resorts in St. Maarten: the Sonesta Maho Beach Resort, Casino and Spa and the Sonesta Ocean Point Resort. It also has the Royal Sonesta San Juan in Puerto Rico for which Service Properties completed a $70 million renovation in 2021.

Sonesta has a master franchise agreement with Colombia-based GHL Hotels for Sonestas in South America, such as in Peru and Colombia, he said.

Sonesta is looking to grow its presence in the Caribbean, Mexico, Central America and South America, Quinn said. It’s a matter of finding the matching the products with the markets.

Royal Sonesta as an upper-upscale option near the luxury space works well in city centers as well as beachfront resorts to attract both leisure and business travelers, he said. Sonesta Hotels and Resorts brands work as well. Sonesta Select as an upscale select-service property type works in commercial centers, business centers and airport locations.

Quinn he’s interested to see how Sonesta’s extended-stay brands would work in the region. As people travel, they want to stay longer, and space is a premium. Sonesta ES Suites and Simply Suites would give them the in-room amenities they would need for such a stay.

Sonesta is also going to bring its midscale Red Lion brand to the region as well as its economy brand Signature, he said.

“It’s been incredible to watch the demand for that in the development community,” he said.

All-Inclusive Resorts

As people take longer vacations and put their dollars toward experiences, there’s some sensitivity to knowing the total cost, Quinn said. All-inclusive resorts let guests know how much they’re spending for a hassle-free vacation that covers their stay, their food and other services. A proxy for this is the growing demand for cruises.

Sonesta’s Maho Resort is focused on families with a kids club and related experiences while the Ocean Resort is targeted at adults, he said. The all-inclusive offerings will meet the needs of the different types of travelers for the types of experiences they’re seeking as well as at price points from economy and midscale up to luxury.

“People want what they want, and they’re willing to sort of work with you to curate those experiences,” he said.

Sonesta’s growth in the all-inclusive space will be organic mostly, but it will be opportunistic as it works through potential deals with different partners, Quinn said. The segment is in high demand and on everyone’s checklist, illustrated by the growing number of competitors entering and growing in the space.

There are nuances around operational efficiency and a need to step up the game in food and beverage offerings, he said.

“It’s making sure that you have a robust offering there and the [food and beverage] fits with the pricing,” he said. “That positioning is critical in all-inclusive because that’s one place where it can fall down if they’re not getting those additional experiences and opportunities at the right product and service level.”

Operators need to make sure they can perfect the business model, he said. When determining the bundled all-inclusive price, they have to make sure they’re capturing the right amount of revenue, allocating it to the right departments and making sure the appropriate return is there, he said.

“There should be a bit of a value perception by the consumer, but you absolutely have to be able to make sure that the flow through is there on the revenue side for the operator in order for them to be able to continue to deliver good food and a good product and have the right staffing levels,” he said.