EAST LANSING, MI—Accountants are typically a conservative group, and the fact that HRC Hotels is owned by three CPAs via HRC Management Co. LLC—Terry Hall, Jim Matuszak and Joe Romkema—has enabled the company to weather the storm during the COVID-19 pandemic.
“When I first got into the accounting business, [I was told] you’re better off to be more conservative and have some money piled up than to not have money piled up and to be more aggressive,” said Hall, who serves as chairman/CEO of HRC Hotels and the managing member of HRC Management.
All of the company’s 17 hotels have stayed open throughout the pandemic, and although occupancy fell to 32% at the beginning of the crisis, it rose to 62% at the beginning of September.
The conservative philosophy has served the company well. “Our cash balance hasn’t dropped. We had the same amount of money going into this as we do now,” said Hall. “Has it affected us? Sure. Before we were making a lot of excess cash; now, we’re breaking even.”
The company was born after Hall had the opportunity to work with fellow CPA Jim Matuszak.
“We got to know each other, and then Jim ran into somebody who said, ‘Let’s look at the hotel business.’ So, he asked me if we wanted to raise some money and buy a hotel,” said Hall. “We had real interest from people who wanted to be in the hotel investment business as an alternative investment. We raised some money for a partnership, and we purchased a Hampton Inn.”
Matuszak now serves as CFO and that Hampton Inn, located in Traverse City, MI, was purchased in 1999 and is still owned by the company. In fact, HRC recently completed a $5.43 million property improvement plan (PIP) for a 15-year franchise extension for the hotel. It is also one of only a couple of properties in the portfolio that wasn’t developed by Good Hospitality Services, which also manages all of HRC’s hotels.
“After hiring Good Hospitality to manage our hotels, we hired them to build future properties; one of the benefits of that is having them open on time,” noted Hall. “If there was going to be a complaint about any of the construction, our management company is the one that constructed it. So, Good Hospitality made sure the hotels were built the way they would have done it if they’d built them for themselves, and it’s worked out beautifully.”
HRC’s name came from the founders’ initials. Well, sort of. H stands for Hall and R stands for Romkema, as in Joe Romkema, a former partner at Hall’s CPA firm who now serves as secretary and treasurer of the company. The C stands for Matuszak’s wife, Cathy.
A majority of the company’s hotels are located in the Midwest, with nine properties in Indiana, four in Michigan and one in Iowa. There are two on the west coast of Florida, with another in development, and another in Nashville.
“We have attempted to balance our year-round revenues by investing in Midwestern towns that get snowed upon and Southern towns that don’t,” said the CEO. “When our Northern locations slow down, our Southern locations pick up.”
The portfolio is made up of select-service and extended-stay Hilton and Marriott properties in secondary and tertiary markets, which has helped during the pandemic and during another crisis in the industry.
“We learned a real lesson after 9/11. Our occupancy went up. I tell that to people and they’re dumbfounded,” said Hall. “What caused that? People wanted to stay home or local. Both of those brand companies are popular, and people gravitate to them. The full-service properties really took a nosedive because people didn’t want to get into the large hotels in the large communities. So, we said, ‘OK, this seems to work in bad times, and it’s been real good in good times.’”
HRC has four hotels in Indianapolis, including a couple of the highlights in the portfolio. “If you walk through downtown Indianapolis, it’s like a very conservative Chicago,” said Hall. “There’s really good restaurants and things to do. It’s very safe in Indianapolis. We looked at Indianapolis as a good place to have hotels, and we were right. They’ve done extremely well.”
He added, “We have a property in downtown Indianapolis [the Homewood Suites by Hilton Indianapolis Downtown] where we took a warehouse from the 1800s and refurbished it. There’s 12-ft. ceilings, and the basketball players in Indianapolis like to stay there because they don’t bump their heads. We also bought a building that was an insurance company office at one point. Somebody asked our architect if the foundation was secure, and he said, ‘You could park tanks there.’ So, we have a fortress—it’s the Home2 Suites by Hilton Indianapolis Downtown.”
Southwest Florida is another important location for HRC. The Hampton Inn & Suites Fort Myers-Colonial Blvd was purchased in 2018, while the Home2 Suites by Hilton Naples I-75 Pine Ridge Road in nearby Naples opened in May. A third property in the Sunshine State, the Home2 Suites by Hilton Fort Myers, is expected to open next month.
“I was shocked when I went into the Naples hotel because of the extra things we did to the building. We don’t like to look like everybody else, so we did some little things in there that really stand out when you walk into the property and you say, ‘Look what they did to the front desk.’ And then you go to the pool section and it’s like being in the Caribbean somewhere,” he said.
The Home2 Suites and Hampton Inn in Fort Myers will be on the same lot. “The occupancy in this area isn’t just high in the winter, it’s all year. A lot of business is moving into Florida, and we see that through the revenue numbers down there,” he said.
Jeffrey Good of Good Hospitality Services serves as president of HRC Hotels, where his role is being the face of the company. “We [Hall, Romkema and Matuszak] don’t like to travel, so we had to have somebody who could show up at the events that the industry has, and Jeff likes to do that. He’s a real people person, and he’s good at providing service to customers,” Hall said. HB