Keeping the Customer Satisfied

Keeping the Customer Satisfied
David G. Marshall
Co-Chairman, The Rittenhouse Hotel Chairman and Chief Executive Officer,
Amerimar Realty Company

Choosing the Right City
In choosing a location for a new hotel, the first thing any developer must look at is the market. From our perspective, if it is over-saturated, with too many hotels, that will deter us from investing in it. If we see a market that has the capability for the segment that we are willing to approach, that would prove more compelling. For example, we built a number of Residence Inns in the early stages of their franchising. We saw that as a market niche that was not being met by any other hotel product. We built seven of those and found them to be very successful investment opportunities. We then saw that that industry was becoming well built – not overbuilt, but there was a lot of competition coming in – so we decided to sell our properties and depart from that sector of our business.

There are many aspects to underwriting, specifically location. Whether the city is on an upswing or a downswing, what plans are being implemented for amenities to the city – all those things will affect our decisions. In Denver, for example, the new airport and the convention center made us very interested in the city because it showed that the city was trying to pull itself up by its own bootstraps, and doing some very exciting things. The convention center in Denver, the convention center in Philadelphia, the Kimmel Center in Philadelphia, the New Constitution Center in Philadelphia – there are many things that are attracting business. Those are the things that make a location desirable. After that, we run our numbers and see if we can receive a reasonable return on our investment, and then we’ll make the decision.
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Building from the Ground Up
We’ve usually taken the position to not build from the ground up, but to retrofit properties. We’ve retrofitted properties that were not hotels and sometimes we’ve retrofitted properties that were hotels. We will look at the whole gamut. It depends upon the opportunity that avails itself.

The segment that we are trying to attract in the market is a key point to consider. We’ve had independent hotels, such as the Rittenhouse and the George. We’ve done franchise hotels, as well. We analyze every aspect of it that we can. We meet with local politicians, if possible, to get an idea of the direction, with respect to the political realm, which the city is heading. When we started construction on the Rittenhouse in September of 1987, the city of Philadelphia was in pretty good shape, and by the time we finished, the real estate market had deteriorated. By October of ’89 the stock market had crashed. It was devastating – the city of Philadelphia became financially hard-pressed, crime was increasing, homelessness was much higher, the park across the street from the hotel was “sin city” – dope smoking on the benches, loitering, and aggressive panhandling were rampant.

So we became very active on the political scene. We met with business leaders, the mayor, the police commissioner, and the district attorney every week in my office. We faced up to the problems and ultimately made an arrangement with the city that we would clean up the square if they would give us 24-hour, seven-day-a-week protection and enforce the laws. That was the start of what is now the Center City District. Philadelphia has now become a role model for the rest of the world in terms of how to clean up a city. We were a forerunner in this respect, and after we agreed to that deal, we went to all the other buildings around the square and told them that we would clean it and the city would police it. We told them that if they wanted to contribute they could, and if they didn’t want to contribute we’d do it anyway. It was not forced upon anyone, but everyone contributed very willingly – we set up a reasonable schedule for them to do it and it turned the city around. If you look at the city today, it is a role model for cleanliness and low crime.

The point is, if you want to be successful in a business, particularly the hotel business, you have to get involved – you can’t just be a passive investor.

There are constant risks. One of the risks that we are currently facing in Philadelphia is that there has been a protracted squabble among the unions at our convention center. As a result of that, since last August, we have had over 300,000 room nights cancelled. That’s a risk that is uncontrollable from our situation. When the mayor called us in and asked us to back the expansion of the convention center, my response was, “Fix the problem, and I’ll get behind the expansion. But if you don’t fix the problem, then it will only grow.”

In its essence, the industry is not an easy industry, but there are many rewards involved. The difficulties are, primarily, that it is subject to some uncontrollable vagaries and variances – the strength of the economy, whether convention centers are booking, the physical and financial conditions of the city you are operating in can all have significant effects.
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Reflecting the City You Inhabit
At the outset, we tried to set ourselves apart from all other hotels. There are other major chains that you can stay in, and once you walk through the door you do not know if you are in Cleveland or Denver or Los Angeles or San Francisco or New York – they are all the same. At the Rittenhouse, I tried to bring my travel experience to bear on what I wanted to see. If I go to Paris, I do not want to think that I am in Cleveland – I want to know I am in Paris. If I am in Chicago, I want to feel like I’m in Chicago. I felt that there are enough wonderful aspects to Philadelphia that we can create an ambience that feels like Philadelphia.

The bar is called the Boathouse Row Bar because Philadelphia has long been a mecca of great rowing. Rowing is a major sport in Philadelphia – we’ve had the Olympic champion Vesper Boat Club here, and we’ve had individual honors, too. Jack Kelly Sr. won the gold medal in the ’20 and ’24 Olympics. We have Jack Kelly’s shell, the Lizanne, hanging in our Boathouse Row Bar. We have a mural that is 50 feet long and 6 feet 2 inches high, of the boathouses. We have fiber-optic lighting that illuminates the boathouses just as if you were actually on Boathouse Row, only it’s better because the lights don’t burn out. We have all the memorabilia from the boat clubs on permanent loan from them. We make a contribution to the restoration of Boathouse Row every year, and that’s how we brought those pieces into the hotel.

The lobby lounge is called the Cassat Lobby Lounge, named after Mary Cassat, a French impressionist artist who was born and raised in Philadelphia, educated at Pennsylvania Academy of Fine Arts, and went to Paris to study painting with all the great French impressionist artists. Her brother and his family lived on the site of the Rittenhouse Hotel. Many of her paintings incorporate the family. While studying in Paris, she had two major hurdles to overcome: that she was an American, and that she was a woman. She overcame them beautifully and became a world-class painter. As I mentioned earlier, the market crashed in October of 1987. The day after the market crashed I purchased three Mary Cassat drypoints and put them in our lobby.

Philadelphia is also a home of great golf. In our meeting room area, we created what we call the Dream Eighteen of the Delaware Valley. We had a committee of champion golfers, plus me – an enthusiastic golfer. We picked the best #1 hole, the best #2 hole, and so on, and we had Michael Brummet take beautiful photographs of each hole, with a little story about each. That’s part of the Philadelphia lore.

We have a local street artist, Joe Barker, who painted an original watercolor for every room in the hotel. We also commissioned Dan Cavaliere. I called him up while we were building the hotel and I said, “Dan, I like your work.” He said, “Which painting do you want to buy?” and I said, “How much do you want to make this year? I want to “buy you” for the year and have you do nothing but paint for me.” I ended up hiring him for 18 months, and he did the mural in the bar plus another 17 paintings that are hanging throughout the property. They are all realistic paintings of Philadelphia scenes. He would come in and we would discuss what season we would make the setting of the paintings and what location they would be. There are pictures of Rittenhouse Square, and there are pictures of Independence Hall and all the wonderful aspects of Philadelphia. Almost all the art is Philadelphia art and Philadelphia scenes, throughout the property.

When you come in here you know you’re in Philadelphia. We use that theme to show “pride in Philadelphia,” so as to become “the pride of Philadelphia.”

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The Importance of Good Employees
The people are the biggest expenses, but they’re worth the money. You can do all your physical plants, spend all you have to on the furniture fixtures and equipment, but the key ingredient is people. Every person who works at a hotel is a link in a chain, equally important, and the weakest one will break the chain. If you spend $150 million on the hotel and a maid leaves a soiled towel under the sink, the guests will never stay there again. If you have a doorman who doesn’t open the door for a guest, you’ve lost. When I hire people, I look for smart people who are extraordinarily enthusiastic about working here. In the first three years when we opened, I interviewed every person who worked here, and if they did not show that kind of enthusiasm, I had no interest in hiring them. When I would say, “Why do you want to work here?” and their answer was, “I need a job,” my next comment was “Next!” If they said, “This is the most beautiful hotel I’ve ever seen and I can’t wait to work here,” that’s what I was looking for. I want people who are self-starters, who will make decisions, and who will favor the guest in basically every response that is possible.

When you check into this hotel, the employees have a smile on their face. When they answer the phone, they have a smile on their face. The guest feels that, and it resonates with them. No one is here because they couldn’t get a job anywhere else. The education level is beyond belief for a hotel. After 10 years we had something like 70 people who had been with us from the day we opened, which is unheard of in this business.

We are blessed with phenomenal employees. I think we have 294 people working here and I probably know all of them or 90 percent of them by their first names. We treat them like family, and I wouldn’t have it any other way. I’ve played golf with some of them; I’ve played basketball with some of them. At the Christmas party I dance with a bunch of them. No one kowtows to the owner. I wouldn’t have any of that. When a party finishes, my wife is the last one to leave; she has to say good-bye to all of the employees. She doesn’t do that for any reason, other than that she truly likes them. We’re friends with them.
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The Personal Touch
The Rittenhouse Hotel in Philadelphia was, I believe, the first, and may be the only, five-diamond hotel condominium in the world. It is quite a unique place; you get to know the guests as you interact with them. There’s a great deal more satisfaction, much more so than in an office building or an apartment complex. You’re able to give something back to the community. When the community has a major event, they think of your place first. We’ve had spectacular events here – weddings, anniversaries, parties, bat mitzvahs, Boy Scouts, cancer fund drives; you get a lot of satisfaction that in some small way you’re giving back to the community and you’re helping these organizations.

At present, it’s easier than it used to be to provide the personal touch. Computers provide a guest profile that indicates that the guest likes the New York Times, the Philadelphia Inquirer, the Wall Street Journal, and the London Times, so you get them for them. When the guest shows up, the papers are there. When you find out that they like a particular brand of scotch or soda, you have that in the room when they arrive. When you find out that they have a penchant for a certain kind of cookie or candy, you have that for them. You question the people who are making reservations – what do you they like? You’re often talking to the secretary, the assistant, the husband, the wife, or whomever, and you ask those questions and mark down the answers and live by it. These are the things that make people walk in and say, “Wow!” When we had the first mayor of Moscow here, the new Russian flag was just made and we went out of our way to get that flag, and we had it hanging in our lobby. He walked in and he was blown away. These are the things that you do as a hotel that are very important to people. They recognize your going the extra mile to make them happy.

When we first opened our doors, I sat down with our interior designer and I said, “Our major competition is X” – I won’t mention names – “and I don’t want to beat them in one area; I don’t want to beat them in two areas. I want you to stay in one of their rooms and make note of every single area. I want to beat them in every single area. I want our guest rooms to be larger. I want our bathrooms to be larger. I want a shower and a tub in every room. I want to have our televisions to be larger, our VCRs available. This is one method to promote customer loyalty – you don’t beat your competitors in one area, you beat them in every area.

We have the best location in town. From the outset, we had an additional challenge because we were independent and consequently, had no built-in referral business. We had to build it from the ground up, and it had to begin with the guests themselves. We go out of our way to give a guest exactly what they want, to make sure that they walk away happy. The best way of showing that is when they say, “By the way, I’m going to be back here in March and I want to rebook the room now.”

If you stick to your knitting and your goal is to make sure that your customer is satisfied, the core values don’t change over the years. What happens is that new and better technology develops that enables you to perform better. I don’t see any changes in the fundamentals over time, though. If there’s a new television that comes out – get it. If there’s a new computer hookup – get it. Video conferencing – get it. Stay ahead of the curve; get the new things that are introduced. Don’t wait until the room becomes tired before you fix it. Don’t wait for the lobby to become threadbare before you fix it. Fix it before it’s a problem.

We have enjoyed what I believe is the highest occupancy rate and the highest room rate, in our market, and compete aggressively with the best- known chains in the business. That’s the feedback we want. We get everyone from the president of the United States to major politicians to rock stars to Hollywood stars to Pavarotti – they all stay here. Oprah Winfrey, Bruce Willis, Tom Hanks, Kevin Bacon – when they’re in town, this is where they hang their hat.
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The Technology Advantage
Computerization allows much more in terms of a guest profile, and it’s easy to keep. That didn’t really exist 10 years ago. Your accounting allows you to get all kinds of information on a daily basis. I get a flash report on every one of our hotels on a daily basis. I know the occupancy, room rate, food and beverage – everything – on a daily basis. This is the best way to keep your finger on the pulse of the business.

We had a situation a number of years ago in which one of our hotels was running probably in the low 80s on a daily basis for months and months. All of a sudden I saw it fall to the mid-60s, and after three days of this, I said, “What’s wrong? What’s going on?” and they said that one of the companies in the area stopped their corporate travel, so we lost all of those rooms. I went to the person who runs our hotel business and I said, “Go up there and don’t come back until you replace them.” We were able to react within three days because I had that information immediately. If this were a typical franchise, I wouldn’t get the statement until 45 days after the quarter, and by that time, 90 days would have transpired on average before I would have even known about the problem. That is why I like our own company running all of our own properties, because we can immediately see a problem and react to it.

The biggest misconception is that the hotel industry is real estate. It’s not; it’s a business. It’s very, very hands-on. With most real estate you can be an absentee owner and you can have someone else run it for you. For us, no one else can run our hotels, and I don’t want to run anyone else’s.

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Staying Competitive
Travelers are much more sophisticated the more they travel and the more they’ve been around. They become more sophisticated. They read more. They are looking for better service than they did before. Ten years ago we had a 3,000 square foot spa; we are now at 6,500 square feet, because they want more equipment, better massage rooms, better steam therapy, beautiful music to soothe them, state-of-the-art machines to work out on, and so on. We have upgraded our restaurant; we now have Jean-Marie Lacroix, the James Beard Award winner for the best chef in the mid-Atlantic region. We have just been nominated for the best new restaurant in the United States. These are things you have to do. People are reading Wine Spectator, they’re reading Harper’s, they’re reading everything they can get their hands on, and it’s even more available with the Internet. If they book a room in a city, they’re not doing it because their friend Joe said so – they’re booking it because they have done their research and concluded this is an excellent place to stay.

As an owner, I tend to be attracted to older properties that have maintained their status, staying ahead of the curve for maintenance and personnel and offering everything that will keep the guest experience great. If you start off with a terrific location and terrific room sizes and continue to maintain the property, guest service level, and the food and beverage to the highest degree, there’s no time limit. Those are the values that never change over time.

David G. Marshall serves as Co-Chairman of The Rittenhouse, an AAA Five Diamond hotel and luxury condominium in Philadelphia, Pennsylvania.

From March 1992-December 2000, Marshall served as Chairman and Chief Executive Officer of Amerimar Enterprises, Inc. and prior to this, as President of Ameribass Realty Company from January 1985-December 1987. Marshall acquired Ameribass in 1988 and turned it into Amerimar Realty Company, of which he has served as Chairman and Chief Executive Officer ever since.

Among Marshall’s numerous significant Real Estate and Business Transactions are the formation and management of the asset side of PNB Mortgage and Realty Investors, a NYSE company with Philadelphia National Bank and Colonial Mortgage, the participation (as owner of the company) in the acquisition and ownership of Pier 39 in San Francisco, CA., and the participation in the acquisition of all Boise Cascade real estate.

Having developed, rehabilitated, acquired and operated a variety of hotels, industrial buildings, office buildings, residential communities, apartments, retail properties and parking facilities in many areas of the U.S., Marshall’s current portfolio of real estate – owned and operated – totals approximately $1 billion

Marshall holds a Bachelor of Science Degree in Economics from The Wharton School of the University of Pennsylvania. He is married with three children and five grandchildren.
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