The Modern Hotelier #224: Deep Dive on Hotel Investment & Growth Strategy | with Tiffany Donato
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David M.: Steve, who do we have on the program today? 
Steve Carran: Yeah, David, today we have on Tiffany Donato, the Chief Investment Officer at Marcus Hotels and Resorts. Thanks for joining us, Tiffany. How you doing today?
Tiffany Donato: I'm doing very well. Thanks for having me. Gosh. Good, good. 
David M.: That's great. Alright, so Tiffany, we're gonna go through a lightning round of some short questions. We're gonna get to know you a little bit better, your, your background, your career, and then we're gonna dive into some industry topics. Sound good?
Tiffany Donato: Sounds great. 
David M.: All right. So what's something that you wish you were better at? 
Tiffany Donato: Catching a baseball. 
David M.: What's your most used emoji? 
Tiffany Donato: Unfortunately the thumbs up, which I know is lame, but I use it all the time. 
David M.: That's okay. Me too. Well, it's a luxury you can't live without.
Tiffany Donato: I'm a firm believer that time is the ultimate luxury. Good. And I know that's not the answer you were looking for, but really trying to focus on being smart with my time and enjoying my time and kind of spending it where I want to. Right 
David M.: Like it. So if you had a time machine and you could go into the future or to the past, which way are you going and what year?
Tiffany Donato: Wow, that's a good one. What year did Amazon stock go on sale? And I can go back and just go all in instead of the 401k. 
David M.: Yeah, that's a good point. What's the best piece of advice you've received? 
Tiffany Donato: Hmm. A little cliche but just kind of be where you are. And I think it relates a lot to, particularly in our industry, everyone moves a lot. And if you treat that move as temporary. The apartment is temporary and all of your decisions is temporary, it's gonna be self-fulfilling. But if you treat where you are as this is where I'm gonna be, I think it really changes the mindset of just like your home life, your work life, everything. You know, treat where you are as that's the place to focus upon.
David M.: Alright, and what is your favorite city and why? 
Tiffany Donato: It's tough as a Texas girl, I'm gonna say Chicago because it's where I met my husband and had my kids. So it's always gonna have a big piece of my heart there. But just Texas in general is a real close tie. 
Steve Carran: Got it. That makes sense. That makes sense. Well, that was great, Tiffany. Now we're gonna dive a little bit more into your background. So like you said, you grew up around the Dallas, Texas area. How did that shape you to who you are today? 
Tiffany Donato: You know, I think, it's a mix of kind of boldness and trying things along with even just my parents were very. I come from a long line of start with nothing, get to having a little start with having a little get to having a little bit more to just enough and kind of a work ethic.
And if you don't ask, you don't get type mentality. And I do think Texas has a reputation for that as well, but I think more so just growing up in a family that instills confidence to try things. I think makes you kind of get out over your skis a little bit, just enough to kind of see what you can really do, but also be able to have some resilience that when you're trying things all the time, you're gonna fail a lot. And to not let that keep you from trying again and again, just being in the middle of the country, we traveled a lot, we had sunny weather, we had all of those things going. And I think bringing a little bit of that, you know, optimism and resilience to just both working and home life to everything is a little bit of what Texas kind of instills.
I think maybe it's why a lot of people hate Texans 'cause we are a little loud and ask for things we probably shouldn't say. But, um, I think it does, particularly in an industry where you're always, I mean in real estate, the number of deals you underwrite versus the number of deals that actually happen. If you get knocked down by something not working, I don't think you can, can stay in the industry. 
David M.: Great. Great. Awesome. So you went to Cornell, you got your degree in real estate finance, and then your master's in Finance and strategic management. How did you end up picking Cornell and those degrees? 
Tiffany Donato: You know, it was interesting, it feels like I do exactly what I went to undergrad for, but when I was making selections, you know, I was focused on the Ivys, I had, you know, good grades in high school. All of those things was focused on really capitalizing, and my family encouraged for college at least go elsewhere. I think they wanted us to come back, but they did say, you know, go out and see the world a little bit when I picked the hotel school frankly, I was focused on it as a business school when I was comparing the curriculum to other programs. In the hotel school, although the case studies are hotels, it's accounting, it's business management, it's business communications, it's marketing, it's finance, it's all of those things that, in my mind, was more of an undergrad business school than a lot of the other programs, even within the Ivys.
And a lot of my summer jobs while in school were, you know, I worked for Merrill Lynch, I did some of these other roles 'cause I thought that was really the direction I was gonna go. Then, you know, during that four-year period, through a combination of getting more exposure to what opportunities there are on the more business and corporate side within the hotel industry, as well as working at a couple investment banks and not necessarily loving what I saw, you know, people who had been doing that for 30 years, what their daily life really looked like.
I think that combination left me very open to the job opportunity that I got when I graduated from undergrad with Hyatt on the development side, and it was, you know, lowly internship analyst making significantly less money than I would if I had taken the other role with Goldman Sachs in New York. But I think I liked the career path that that led to better. And obviously it's worked out kind of very well for me. But at the time a lot of my friends thought I was crazy, but. 
Steve Carran: I can imagine. So Tiffany, we have a little debate. We need you to settle for us looking out your window, you have the city Hall of Milwaukee right behind you? Yes. You've also lived in Phoenix, Arizona. Where David lives right now. I come from Wisconsin, went to college in Milwaukee. So you've lived in both places. Where is out of those two your favorite place to live? Any tips of where to go or what to do in that city? 
Tiffany Donato: Interesting. So one of you is gonna like this answer better than the other, and some of the context is, I did grow up in Texas with sunshine. So if I could. If I could move Marcus headquarters to Arizona, between those two, I would. And frankly in the Phoenix area, we lived in Gilbert. Mm-hmm. Absolutely loved it. Beautiful area, great for young kids, it really was a wonderful experience. We liked it so much better than we thought we would when we first moved there. But then in Milwaukee you have this little bit of like, you are in a city and I can walk out the door to. Restaurants, bars, theater, all of those things. It's kind of a, kind of a mini-Chicago, which of course milwaukeean don't like to consider it. But God, I really do love both. If I have to pick between the two, sorry to say Arizona, but it might also be, I've got young kids, we had a pool in the backyard.
I could wear them out so much more easily year rounds there, um, than here. But I mean, they both have amazing things. And the advice I give in both is when visiting a city. People have such an impression of just where they visited for their meeting. So again, Arizona. I had been to lodging conference and I'll go again next week. I'd been to Phoenix once a year for 20 years already, and my impression of Phoenix was just the areas I had been for the conference. Yeah. And had never really explored some of the nearby suburbs or other neighborhoods and things there. So I think if anyone has the time when they travel, it's like go to a couple of the neighboring communities to really get a feel for what it's like to live there because there's very few cities in the US that people live and work downtown in the same area, and it's hard to really get of a vibe and a feel for what the city's like, just where you're visiting and going from the airport to your hotel. 
David M.: And just a pile alone. I think Arizona, for me, I'm from outside of Philadelphia, lived most of my worked in New York. Arizona is one of the most misunderstood states, like people just think it's desert and there's nothing there, and there's great lakes. And as you go north to Sedona and Flagstaff, there's actually skiing and things of that nature. So I'll make sure I have a separate little place to store this part of the episode for Steve.
Tiffany Donato: There you go. And I love Flagstaff as well. Actually, there's a lot of lead bets up in Flagstaff. Yes. My grandmother, grandfather, the library at NAU is named after my great uncle. Wow. I mean, there's a lot of Wow, Arizona and my bloodline too. 
Steve Carran: So well, David, you said you have Good Lakes. We have the Great Lakes, but that's another conversation.
Tiffany Donato: There's more fresh water up here. 
Steve Carran: Anyways, that was great. Now we're gonna dive into your career a little bit. How you got to, uh, be the Chief Investment Office at Marcus Hotels. So. Right after college, you got kinda unintentionally pulled in hospitality through real estate. Right. Can you tell us a little bit more what pulled you into hospitality?
Tiffany Donato: It actually starts way back. My first hotel job, I was 15 years old and I'm trying to think if it was legal working or not, but um, my godmother was head of sales and marketing for Lowe's Hotels and working in Dallas and the Lowe's, Anna, to, which I think is now a Hilton. They were shifting their sales system from paper to digital, I as a 15-year-old could type faster than any sales manager in their office. So I spent the summer literally typing in group data from fax paper that was starting to fray and files into their Delphi system to kind of share the information. And so it was my first hotel job, but I think it was also the first glimpse into the business, hotels outside of the front desk, everything you see as a guest and a little bit of kind of the business operation of it.
So I had some exposure to that. And then within the business world, it's just a little bit more fun that you get to walk into and experience the end product versus in some other businesses. You know, I get that a lot of my time is spent in Excel worksheets and moving numbers around and things there, but I also get to walk into a hotel that gets built 'cause we made those numbers work. Even I remember a very cool experience. I did a lot of work on the reopening of the Hyatt Regency, New Orleans, post-Katrina, and it was very complex to get that renovated, rebuilt, all of those things. And every time I visited the city for meetings. A hotel I would check into at least one person when they saw us with Hyatt said, oh my gosh, I can't wait. I worked at the Hyatt before it closed. I'm gonna work there again. When it opens and being there on opening day along these lines of employees that are so excited on their first day and their fresh uniforms, I think it puts an element to business that a lot of businesses don't have. That kind of combines the the people side with the numbers in a way that's relatively unique, and I've always enjoyed that.
David M.: That's great. That's great. And so you worked your way up to SVP of Capital Strategy and Real Estate Transactions. Can you tell us more about your journey at Hyatt and what you take from that, that you keep with you today? 
Tiffany Donato: It's interesting the starting as an intern slash analyst in 1998. I guess I'm revealing my age here. Hyatt was also a very different company when I started. So Hyatt Development Corporation was five people led by Nick Pritzker. I was really the only analyst in the company, so I had kind of this idea of let. Let's do these projections in a spreadsheet. Let's run some sensitivities. Let's use some of these new tricks I learned at Cornell. And then as we got that system more efficient, I then had time to also say, Hey, can I sit in on this call while you're negotiating this term sheet? Can I sit in on this meeting while you're flipping through this markup of a hotel management agreement with legal? I just tried to, again, my, my statement about kind of trying to use your time when I had downtime, I wanted to use that to say how can I better understand the next level?
And I don't know if you can replicate my career path as well today when you have such segmented departments, which obviously you have to do within a large public company. But I was able to be an analyst slash junior developer writing term sheets, marking up HMAs, doing all of these things at a very early level when you had one small department doing all of it.
And then as the company started to grow, I then, you know, once I was able to hire some analysts of my own and then work more on the management side and frankly the real estate side 'cause Hyatt then needed to reorganize to go public and we needed to pull real estate holdings from entities all over the world into one holding company.
So I really started to dig in on the real estate side of things there and a little bit of asset management and structuring. Then again, it's like you hire some analysts and you can do some other work and then you hire some junior development people and then you can start to do other work. So I started to get more and more involved on the real estate side, just 'cause it was a little bit more complex.
And frankly, just my knowledge base from being at Hyatt for a certain period of time, it's easier to hire people to do some of the other things. And then, you know, nine 11 happens, the global financial crisis in particular, I was able to, I think, be flexible and shift over to. Let's start digging into these S NDAs and half of our hotels, even the ones we just manage, are now being managed by a special servicer who doesn't know the business or a bank thinks they can terminate and they really can't. So I would say kind of trial by fire, the global financial crisis got me involved even deeper on both the real estate side, but also call it within the legal documentation outside of the hotel management agreement and beyond a purchase and sale agreement along that same time I went to business school in Chicago, I was very lucky that University of Chicago, now known as Booth, uh, had a weekend program. So I was able to get my MBA on weekends while still working full-time and doing all the travel that that entailed. But yeah, more and more I was pulled into the real estate side.
But I also would say to anyone in hotel real estate to try to do this piece without a strong knowledge of a hotel p and l without a strong knowledge of hotel management agreements. Without a strong knowledge of all those ancillary agreements, you're putting yourself at a disadvantage both in your underwriting and your deal structuring. If you're only looking at the real estate piece and not what builds that NOI that you're so focused on. 
Steve Carran: Well set. So from there, you were the SVP of Investments at Atrium Holding then the principal at TLD Investment Advisors. And then for the past two years, you've been the Chief Investment Officer at Marcus Hotels and Resorts. What made you decide to come to Marcus Hotel? 
Tiffany Donato: You know, Marcus, I've always been, particularly being based in Chicago, I've always been very aware of Marcus, even though they're a relatively small group. Um, and I've had great relationships with a lot of their team members and everyone. And again, it's a company that's been around for 90 years, I think this year is our 90th anniversary, and even the hotel segment has more than 50 years.
So there's a longevity and a trust and a reputation that I've always really admired with Marcus. But historically, I just thought. Hey, if they're small, they're probably gonna stay small. It didn't really pop up on my radar from a growth perspective where I feel like most of my skillset goes to acquisitions, dispositions, let's structure deals, let's find partners, let's do all of that.
And then they reached out while I was frankly pretty busy consulting TLD investment advisors was just my own group and I'm. Again, thanks to everyone in the industry. I was always so lucky that when I was consulting, my phone was ringing instead of the other way around. So I consider myself very fortunate in that, um, for those brief periods of time. But when Marcus reached out and the chief investment officer role is a new one that they had not had historically, and it was with a little bit of an idea that they do wanna shift how we use our balance sheet with a little bit more focus on growth on the hotel side and with using that balance sheet on the investment side, we're not looking to compete.
You know, with Abridge Davidson, these other big third-party managers, we've got 16 hotels, seven of which we own, nine of which is kind of partnerships or third party, but we're very hyper-focused on our kind of small and midsize portfolio. So we wanna grow, but without losing what we think. Makes everything special. And frankly, we wanna grow as real estate partners, not just third party management agreements that we think are, you know, we think we are great managers and we add a lot of value there, but overall with our strategy, having a lot of three to five year agreements and moving our people around with all of that is not where we think we get the best results.
Whereas aligning ourselves with the real estate really is. And so the creation of this new role was to kind of pull in from me some experience that. Marcus hadn't really been doing, they'd been growing. Most of the hotels are owned a hundred percent on balance sheet, no debt, which was a godsend during COVID, obviously, to not have any lenders to deal with during all of that.
But it's not the most effective way to actually grow, add properties, add geographic distribution if you're a hundred percent equity off of the liquidity that you have. So my focus has been to grow, but with partners. We've done that in a combination of ways, you know, gp, LP partnerships with us being a GP or cog.
We've talked to some existing owners about recapitalizations and that's an area that I think is gonna get pretty interesting as PIP requirements are starting to put pressure on everyone now. But they don't necessarily wanna have to sell, but they may not have the capital because we can come in as an equity partner, we can say, Hey, if management is available, because we always wanna manage anything we're invested in, we might be able to fund that PIP for you.
Let's have this joint venture that we're creating off of this, but we can bring capital to the table along with the business plan and repositioning for it. So frankly, what attracted me to the Marcus role was the people at Marcus and the reputation of how they work. And it sounds weird to say the freedom to not do bad deals. There's always pressure to put money out the door anywhere you are, and there's always pressure to grow. But there's a good comfort level that we look at a lot of deals, and most of them frankly, don't pencil with the asking price. There's this bid ask spread that you know the whole industry has been dealing with.
I feel empowered to make good decisions instead of just having to kind of throw flags on the board. And it's really nice and we, we've got some exciting things in the pipeline now, which makes it kind of fun to talk about the, the past year or two, just overall for transactions has been slow for everyone, but I feel really comfortable that we're making the right moves and putting the right structures together for kind of long-term hold deals and long-term value.
David M.: So you touched on it, but maybe for those who aren't familiar, like you said with Marcus, maybe a little bit more about the types of properties, locations, right. Things of that nature. Maybe dive a little bit into that so people understand more about Marcus. 
Tiffany Donato: Absolutely. So we've got 16 hotels and that runs the gamut. Most are full service and lifestyle. I would say our limited service one is the AC Chicago, which the whole industry can debate whether that's really limited service, select service, hybrid full. But again, it runs the gamut from, we've got a small hotel in the Garland, to an over a thousand acre resort, grand Geneva that sits kind of in between Milwaukee and Chicago.
And there we've got, you know, a ski hill golf courses. We're looking at adding glamping, doing things there. But overall, I would say our profile is we are full service. Boutique or lifestyle is the majority of what we have, and about 40% of our rooms are completely independent. Obviously we've got great relationships with all the brands, uh, but we also really take an independent lens, uh, and frankly an independent hotel we developed here in Milwaukee, the St. Kate is a brand we might look to expand into other cities. We've been so happy with it, you know, exceeded all of the expectations. And that might be one that although we weren't brand building when it was done, we think it is something that could become unique in, in something that you can expand into other markets in the US as well.
Right now, I would say if there's a lack of visibility or knowledge of Marcus, beyond the fact that we've got. 16 hotels instead of 1600 is, we are a little bit clustered in the Midwest right now from the ownership standpoint, and I think that makes sense with our, you know, Milwaukee headquarters and Milwaukee home base. But we are actively looking to expand that geographic footprint. For both geographic and frankly, seasonality diversity. I know our CFO would love some Q1 performance from some resorts in the Sunbelts when the Midwest is covered in snow, although frankly, the ski hill in Grand Geneva helps us a lot there.
But a lot of what we're looking at is. Let's look at the coast. Let's look at Sunbelt. Let's add some geographic diversity, because I think a lot of our growth can be a little bit hub and spoke. You know, once we've got a hotel in Texas, it's a lot easier to talk to other owners about, here's other hotels we can manage or invest in, in Texas, because I think any owner, and it's a smart question, is what else do you have in the region? What else do you have in the area? Is your knowledge base gonna work for a hotel like mine? And so where we get the most opportunities and the most inbound is frankly kind of scatterings around some of our existing hotels. And what I think is helping, and this goes back a little bit, to growing with partners instead of just our own or totally third party, two of the pretty active potential acquisitions I'm working on now, both are with partners. We have on other deals that we've done somewhat recently. So you do a deal with a partner, you do a good job, you execute well, and then it's easier to move forward with them again. And frankly, then they come back to us on, Hey, you're doing a great job managing and being a partner in this one hotel.
Let's look at more things together. I think that business case is proving itself out. Again, deals are hard to do, knock on wood. These are deals that actualize or kind of get done in the next two quarters, but we're very happy with the fact that the approach of. Growing with partners and letting that yield, even exponential growth is starting to play out 'cause we'd rather do multiple deals with really trusted, strong partners than let's just do one and done with a bunch of different groups. I think we like to be seen as a company that you do a lot of deals with as opposed to, Hey, we did that one but I wouldn't ever work with them again, type thing. So we're very relationship focused.
Again, we're a public company, but. LED by a family office. It really is. You know, it's still the Marcus is in control and making a lot of decisions. Obviously consulting with, you know, the board and everyone. It's a very, very cohesive group, but we take a very long-term strategic approach as opposed to feeling like we just have to hit quarterly numbers.
Frankly, part of that's probably helped by the fact that you know, more than half of the company's public EBITDA's movie theaters instead of hotels. So I get to go under the radar a little bit. You know, when we spent 40 million on the Hilton in town last year, people aren't overly focused on how much we've been putting capital into our own portfolio during this downturn because most of the talk on the earnings calls is Tom Cruise and movies and what's going on with digital streaming. And I can get creative and go long term without having to worry about. Are analysts gonna freak out over something we did one quarter that doesn't really have earnings until the following quarter. Things like that. Um, it allows me and really the whole company to be a little bit more long-term in that thinking.
Steve Carran: That's great. And you led perfectly into my next question. Okay. I think you might be one of the only hotel groups whose sister company is a movie theater. Company as well. Growing up in Wisconsin, went to Marcus theaters. You get any special perks with the movie theaters or are you thinking about incorporating the theater side into the experience side with the hotels at all?
Tiffany Donato: You know, there's always a thought of how can you be better with these things? And again, yes, I do get free movie passes for me and my family. I'm not saying it's the only reason I took the job, but we do really use it. Uh, and actually my kids and I will be in the background of one of the Premo clips. No way to like a raffle that I won for charity.
So, um, keep an eye out for that. Well, dear. But I think it does speak to trying to be creative with the spaces that we have. And we do this both with movie theaters and, and hotels. So for example, on the theater side, to address that, at one of the theaters nearby, they've kind of converted one of the big theaters into almost a sports bar, and we call it the Wall.
And you have this huge screen and it's like, hey, Michigan versus Northwestern are playing like big sporting events, big NBA games, everything are screened in that space. And you have servers bringing you beer and wings and you're watching the game in a movie theater. But it's kind of set up in that way.
And I think because we have, again, so much ownership of our theaters. Again, during the pandemic, I mean, talk about a perfect storm during the pandemic to own movie theaters and hotels, but they really used it to, you know, let's buy out leases on the theaters. Let's reinvest in both hotels and theaters while they're not packed, and really kind of setting ourselves up for exponential growth outside of it.
I think that entrepreneurial spirit of, Hey, let's try it. Let's convert this theater into the wall, and if it works, then we can roll it out in more places. In the same way with, if we have an underutilized outlet or just meeting room or space in one of our hotels at the St. Kate, we have kind of a PDR that wasn't being used kind of as much as we thought.
So we said now we're doing Oma Casa once a month and it is local people coming to it and it sells out. Instantly every time. So I think we try to experiment. It's a little bit of the theory of like make mistakes, but then fix them quickly. And I think that ties to, whether it's theaters or hotels, how can we better utilize space that may have either outlived its use or outlived what people think of it and how can you kind of convert it into a different experience. And again, that other example I'll give there is, you know, glamping or outdoor experience that everyone's talking about. Because we have all this acreage in Grand Geneva next to this resort that's already kind of full year. We said, all right, let's create our own concept of what we think works here, and if that really works, then we can roll something out.
We've looked a lot at kind of investing in other people's concepts. We've had a lot of opportunities to do that, and frankly, we consider ourselves entrepreneurial and saying, let's start our own thing the way we think it should be, as opposed to just kind of buying in to something someone else has done and that applies across the gamut. I mean, we all sorts of things, call it hospitality adjacent concepts. Sure. We talk about all the time whether it's something that can work in our hotels or theaters, both obviously, the family has a lot of restaurants. There's a restaurant group, real estate everywhere. So I would say from the standpoint of kind of theaters and hotels together, they both are tied to creating experiences for people that are worth leaving home for our couches have gotten so comfortable and our homes have gotten so comfortable that is it still worth it to go on a staycation out? Why? You know, would you go spend a weekend downtown in your own city? Why go to a movie when it's gonna be on streaming in six months or probably less? Things like that.
So there is a lot of tie in to what might seem like unrelated businesses. Trying to focus on the experience and you know, the capital side, again, we've invested more than a hundred million over the past couple years, even within our small portfolio on really improve and reinvest in what you own. But the experiences are what, what really tie people to it and that's where we really try to hyperfocus on our smart portfolio.
David M.: I have to say before I ask the next question, the Garland is my favorite hotel. In the LA area, the restaurant I love. It is incredible. And when I was commuting to LA I tried to stay there as much as I could. It was, it was just an awesome place, great vibe. Any plans for Marcus to expand or what? What's next? What's up and coming for Marcus? 
Tiffany Donato: Absolutely. Looking to expand. Yeah, it would be. Pretty career limiting for me as the Chief Investment Officer to not be looking to do that. And again, you know, shortly after I joined, we did, we acquired the Lowes, Minneapolis with some partners, converted that into a Hilton, and are working on getting the renovation going there. There's a couple other deals, like I said, kind of in the LOI stage pipeline on acquisitions that we're looking at. Now. Again, we do have, I mean, we've got good liquidity. We have a very strong balance sheet. Very attractive debt ratios, all of those things there. And we do wanna use it, but use it smartly, not just kind of throw money at a deal 'cause we have the capital.
So we're definitely looking to grow add properties. Primarily, I think that growth is gonna be through joint ventures and partnerships on both hotels that are on the market. And another one is frankly, a recapitalization with an existing owner, they're looking to, they're restructuring some debt they need just a little bit of equity.
They also wanna bring in a new manager and all of those dots on the map, at least the ones I have under LOI right now are all outside of the Midwest, so we're not anti Midwest. We will always continue to grow here. I think obviously we've got have reputation of excellence there, but for growth, we are looking for geographic diversity.
As I said, at least my nerdy, I'm looking for some EBITDA diversity from quarter to quarter to give to my CFO to smooth that out a little bit. And yeah, we, you've gotta do that with yields that are attractive to third party capital. Uh, you've gotta balance the goals of. Everyone looks at a five-year levered IRR as if that's the determination of if a deal is good or not.
And obviously our deals all pencil with that. But admittedly, I'm more focused on what is the stabilized cash on cash? What is the stabilized debt yields? Because as we've all learned through all of these cycles, if your investment only works, if you have a capital event in year three or year five. You might be in trouble with what your expectations are.
So we like to run five-year scenarios, 10-year scenarios. What are these really annual yields that we're looking at as probably more of the focus than just that five-year IRR, particularly with current debt rates. If you're, if you're over focused on that, it's very hard to, um. Look at the overall strategy, but yeah, growth is absolutely an area we're looking for.
Marcus wants to grow the hotel piece within the corporation. We're still dedicated to theaters and still growing within that, but in my mind, I would like for the hotel division to be a larger part of the ebitda, and I think we can do that pretty strategically. Again, if you've got 16 hotels and you add two a year, that's very strong growth without having to get crazy, without having to go out and do deals, just to add dots on the map. So I mean, I feel really good about it and. Good. Again, if we have this same conversation a year from now, I'd love to be able to say all three of those deals I had under LOI just happened and now you know what they are, but we'll see.
Steve Carran: Alright. Good luck. That's great. Yeah, that's great. So now we're gonna dive a little bit more into the thought leadership section of the podcast. So this year has been a little tough for hotels with labor shortages, rising costs, things like that. What is, um, Marcus Hotel's growth strategy over the next couple years to kind of overcome these challenges?
Tiffany Donato: Well, I'd say first it's making sure we're underwriting the challenges. A lot of hotels you look at right now are understaffed while they're on the market, or they're kind of running skeleton crew. So I would say a little intellectual honesty in our p and ls both helps and hurts us. We're not gonna win any proforma wars against other managers.
Frankly, very often when someone's kind of looking for a manager with an acquisition, we're told that our p and l is significantly lower than some of the others, and then a year later. They tell us that ours was accurate 'cause I think again, because we are also co-investing, we're very honest. We're not trying to sell a dream to someone and labor cost is a very real thing. And on the thought leadership side, I think we're very proactive on trying to look at AI, try to look at solutions, um, try to look at areas that we can be creative with, how you staff. In any market where we've multiple hotels, obviously looking to complex at the kind of non-hourly level is a great way to try to add efficiencies and get creative there.
But yeah, you have to underwrite a realistic cost approach. Then also underwrite, how can you actually compete within this market? And I'd say historically, even in the downturns, we've been great at projecting kind of our RevPAR index. How are we gonna reposition against this competitive set? And then with COVID happening and other things you see, you know, impact to the bottom line. But our RevPAR index is still there, so there's only so much you can do to drive in the market, particularly in these smaller hotels. I think if you're a thousand room convention hotel that can bring in meetings and kind of do things on your own and compete with a convention center, you've got a little bit of an idea ability to counteract what's happening in the exact market. But I think where we are best is really projecting how we're gonna compete within what the market is doing. And that's where it gets challenging too. You've got a lot of deal opportunities where it's a great basis. People say, Hey, it's a basis play. I'm like, it's you can't eat basis.
And this is a city that has pretty low projections for growth or the opposite of, you know, people are projecting recovery. I mean, the poor owners in San Francisco have been trying to project, they're finally getting some recovery, but there's been a lot of deals at an amazing basis. That still kind of don't pencil in some of these markets that have struggled to return.
So I think intellectual honesty, creativity, trying to really find ways, again to use underutilized spaces and see if you can add some ROI to those without spending too much, um, has been our approach. And again, just the hyper focus and change quickly. I mean, there is a monthly performance meeting where every single one of our hotels is discussed by the president of hotels, the chief commercial false commercial officer of hotels, like very senior leadership, is talking about every hotel in our portfolio every month and making adjustments and making changes. And that could be as simple as, okay, next month looks a little tough, let's reduce rate a little bit and see if we can steal some market share with some occupancy, and if that works, maybe we ramp back into it or vice versa.
Obviously, you'd always rather push rate for the margin, but you have to adjust with the market on a very quick, sometimes weekly, daily basis. And I think that's where being hyper-focused as opposed to just being kind of plugged into a revenue management system is where you make the difference. And we see it in market share.
Even in markets that are underperforming, we see it in market share through truly that like flip the switch. Okay, you've got a band coming in, what can we do with this other event space? It kind of markets to them and gets them to spend more at the hotel while they're in town, those types of things. And I know every hotel does that and every good GM does that.
But I think we focus on that flexibility and that kind of quick change at such a high level that it helps give that direction to the field. And then for me, I always tell them, the better the hotels we have run, the easier it is for me to get new deals. So I say, you know, every dollar you save, apply a cap rate to it and let's do it.
Every dollar you bring in, apply a cap rate to it, you're increasing that value. So even when we do get together with our GMs and accounting groups and sales, I always hit home that it may seem like there's micromanagement 'cause we're trying to cut 10,000 out of an annual budget, but multiply that by at least 10, and that's the value of the asset to the market and to the world.
So we try to make sure that our GMs are thinking like an owner. When they're making these decisions as opposed to empire building because we're getting a fee on revenue. He said actually the returns to markets are a lot more tied to the real estate returns than that management fee. So we need our GMs to be acting kind of as owner's representatives for us with every decision that they make.
Steve Carran: Well said. Well said. 
David M.: Yeah. So you brought up how competitive the hotel market is. What advice would you give to hotels to stand out and how is Marcus standing out? 
Tiffany Donato: So again, I think if I am talking to owners, which I fre frequently am they tell us when they come to us in particular is when there needs to be creative solutions to. I don't wanna say poor programming, but inefficient programming or outdated programming. And that can speak to, you know, here's a hotel that had three restaurants 20 years ago 'cause people used to love hotel restaurants. What do you do with these spaces now? So I think we really excel with getting creative and kind of using that entrepreneurial spirit to, I know it's kind of a geeky term, but how can you increase your revenue per square foot and how can you accrue your profit per square foot of your building? Not a whole lot you can do with back hallways or things there, but, or can you turn what used to be that room into a golf simulator or things like that. So we're always trying to think through spaces and how you use that square footage in the best possible way.
That's kind of an owner mindset to it. And as far as, again, standing out. I know it sounds a little cheesy. It's like you have to create the experience. There's certain things that every hotel has to do. The room has to be clean, the wifi has to work, the service has to be friendly. It it's easy to put on a slide deck.
We stand out 'cause we provide great service and here's our service scores and all of those things. I think those are must haves and those are the minimum that you have to be providing to get people to stay at your hotel, wanna stay at your hotel. For us to get the referrals that we do from our brands, we're so lucky that you know, Hilton, IHG, Marriott, everyone, they're frequently recommending us to some of their owners 'cause they know that we execute well for their brand. And I think that's a strong indication. But what are you doing that's above and beyond that? And realistically, without adding a ton of costs, it's really easy to add amazing experiences that guests love by giving away free stuff.
How are you creating something that they'll pay for? They also enjoy, they're gonna talk about and come back for or recommend and things there. And again, I do think that's something we're able to do because of the size of our portfolio. I think if we had 200 hotels, it's very hard to execute that level of creativity and flexibility.
And I think right now that's also why our core is on some of these lifestyle hotels where you can be a little bit more unique, where the guest is looking for something that's a little bit more unique. And I think that's why there's a good fit for us. And obviously we do very well with, you know, some of our more typical meeting and convention hotels because we try to add some of that level to it. But I think it's an advantage that our scale or lack thereof, actually gives us for both ourselves as investors and for our ownership partners. 
Steve Carran: Well said. Kind of leading into the next question, you said you gotta get creative with spaces, right? And help create these experiences. I feel like experiences have become a part of, you know, some of Marcus's properties. How are you focusing on the experience side of hospitality as some of your properties? 
Tiffany Donato: You know, a lot of it kind of starts with the basics. We really encourage. Everyone at the property to talk to the guests a lot about E and even asking kind of challenging questions instead of just saying, tell me what was so great about your stay. What do you wish we had here that we didn't have? What was missing? And so it's kind of this aspect of look for exploratory information instead of confirmatory information. I know, sorry, that's a little business school. Speak for everybody there, but it, it's. If you ask questions that are gonna give you answers that you're looking for, there's a certain level of feedback you're gonna get.
If you ask questions that make people feel like they can give a candid answer, you're kind of almost demanding. What did we do wrong or what should we fix? What should be better next time? Whether it's just the tech survey that's being sent out, or really more importantly, just talking to guests while they're there, getting feedback from the front desk of, Hey, what were people asking for? Not what were they complaining about, but what did people ask you at the front desk? Did they ask if there was a walking trail? Did they ask if you had any bikes to rent? Those types of things. So weirdly enough, I think you have to search, look for issues, and find those issues to create the solutions before it's really even kind of an expectation.
And again, that leads to, hey, maybe one week people ask for bike rentals and then you bought a bunch of bikes, and then the next two years, no one asks for a bike. But you have to be willing to, again, I mean, Greg Marcus says this all, he is like, make small mistakes and fix them quickly. So it is, let's encourage ourselves to make mistakes, which sounds counterintuitive, that's obviously not a business model. Let's go find mistakes. But I think that's the only way you find unique and creative solutions as well. And so, it's really as simple as just talking to people and digging for. What they actually want or what they wish they had. And then trying to pay attention to trends as well.
I mean, frankly, the movie theater and restaurant division gets a lot of requests for, hey, they want this kind of beer, they want this drink, they want this non-alcoholic cocktail. They want these types of things. Okay? If that's trending in theaters and restaurants, people probably also want that on the hotel bar menu.
So let's use all the information we have from everything we have to kind of try it out, see what works, see what doesn't, but sometimes you really have to dig for that. Honest feedback, which sounds counterintuitive to how much people like to complain on Yelp and like to complain about things, but to dig for what you should have or what they wish you had, just takes a whole lot more work.
Steve Carran: You might have to do some snowmobile rentals as well as bicycle rentals with the, there you go. With the winners and I know have scooters are CR even now.
Tiffany Donato: Yeah, snowmobiles there.  I'll talk to legal about what waivers we'd need for this. 
Steve Carran: Yeah, probably need a few. Probably did few. That's a great segue. 
Tiffany Donato: No, it did lead into, you know, we did a lot of igloos in the winter at Grand Geneva, outside on the pool deck. Hey, the pool deck's, empty space. That's not making money for several months, a year and less. Let's add a really cool, fun experience people can do smores, drink a little too much of cinnamon flavored drinks, all of those things.
But how do you monetize spaces but also creating. Experience. Again, my kids ask about going to the igloos all year long, for years since we did that once. I try to remind them that it's not really a summertime thing, but if you think I'm gonna be able to get away with not going to the igloos at Grand Geneva, even one winter that we live here, you don't know my kids.
David M.: Yeah. That's funny. So kind of continuing on that, what trends are you seeing in hospitality and which ones do you think are gonna continue to grow? 
Tiffany Donato: You know, it's interesting, we talk about this a lot, even getting into specificity. I guess I touched on one before, truly, the trend toward mocktails and less drinking both on transient and group events, I think group events are trying to recognize that, and frankly, weather is that people just trying to live a healthy lifestyle. Frankly. I think there's an overlay of, you know, there's weight loss medications now that people react badly to large meals or sugary drinks or things like that. So even just the other day we were saying within our mocktail menu, let's make sure they're not too sugary.
Because you know, if you put a Venn diagram of people who don't wanna drink those, some people. May also not want thousands of grams of sugar in their drink. That looks fun. So let's think about that. So how do you again, create events that aren't just a cocktail party? How do you create things people can do at a reception that's not just standing at the bar?
I think that is a trend that does seem to be continuing to grow as it relates to, and again, on a hotel, P and l, alcohol sales have always been very profitable. So you like having those, but how could you then convert trends into other ways people can spend their time and money? So that is one there, you start to look at length of stay and how can you add that at certain spots. Obviously everyone's trying to deal with. It's not really seasonality. It's day of the week as return to office is making Tuesday, Wednesday, Thursday pretty strong. How can you be more creative with things you do on Sunday night?
And again, that's something we speak to, whether it's omae here in a darkroom or things there. How can you bring traffic into the hotel, not just for your OC and a DR, but you're bringing revenue in and keeping your staff working good hours because. The labor market is so competitive, both on pricing and just finding the best people that as long as you're keeping people engaged, they're working events, they like to work, they're getting the hours they need to get, even with fluctuations and seasonality and those types of things.
I think focusing on that is the way you then provide those experiences. You can have a great drink menu, but if your server isn't engaging, you're not gonna sell those drinks. So you have to focus on, you know, every piece of that equation. When you're looking at it, but yeah, the, the mocktail trend or a little bit move away from drinking events, I would say is one that we've been talking about recently that seems to have some staying power.
Steve Carran: Well said. So what advice would you give to somebody who's looking to be a C-Suite executive and their dream job is for a hotel group in Milwaukee, Wisconsin. Right. What advice do you have? Somebody, right. Somebody like that. 
Tiffany Donato: Right. Something so specific, and I get it. The view is very compelling here today. Honestly, my advice I always give is be the hardest worker and show up. And that's not saying you have to do anything crazy, but be reliable and be flexible. Most of my advancements in career that seem to be on a different or advanced trajectory from some of my other peers who gotta school at the same time was me kind of raising my hand for the unknown.
So I sometimes joke that my job description, you know, when I was, you know, SVP of Capital Strategy and a lot of people would say, what does that mean? And I said, I'm never in the room to say not it, when an issue comes up or something arises. And so it would land on my desk 'cause it was complicated or different.
And again, I think it ties back again to this idea of kind of growing up of like, try it, be bold, give it a shot, do those things. So I think particularly within real estate, you need to be flexible, creative. There's a lot of hard work with it. I mean, you do have to show up, you have to be reliable, and you have to be honest.
If you're trying to sell some numbers to get a deal done that aren't gonna actualize, maybe you got that one deal, but you don't get the next 10. So I think kind of throughout my career, even starting as an analyst, trying to be realistic, getting yelled at by developers who want the deal to look better to win a deal.
But me saying like, ops isn't gonna sign off on it. Those types of things. I think if you can combine, you know, integrity, just show up. And be flexible. And I think that applies frankly, to any job. I mean, it's not even specifically real estate finance, but you gotta really know all the areas of the business.
If you only know that returns page, but you don't know what the occupancy and DR dynamics are, that lead to that return. You're gonna find yourself kind of getting trapped in a deal that didn't work and you didn't understand the dynamics, or you didn't even recognize some news you heard about the industry or the market would impact that.
So you've gotta really kind of branch out from your job description early on, um, in kind of an exploratory manner, and ask your boss what else you can help with. What's the term they use? Eat the frog. What does your boss not like doing that you might be able to do instead? You're gonna learn a lot from it and make your boss wanna keep you around.
I made it throw a lot of reorgs, I think, 'cause I did all this stuff other people didn't wanna work on. But yeah, it's, it's really that just be willing to do the work even if you haven't been a hundred percent trained in it yet. Just offer to help. 
Steve Carran: Great advice. 
Tiffany Donato: Yeah.
Steve Carran: Great advice. So Tiffany, we've been asking you questions this whole time. This is where we turn the tables and let you ask David and I a question. 
Tiffany Donato: Interesting. I guess it might also be a little bit of a segue from a conversation. We talked a little bit about labor of and AI and things there. You guys have more of a tech background than most of us in the hospitality industry.
In my 1990s, Excel skills have held up pretty well, but with your knowledge of what's happening in tech and in other businesses, and with your knowledge of the hotel industry, based on those of us that you talk to, what are you most surprised by? That we are not utilizing? 
David M.: I mean, I would just say I think the one thing that it's, it's, I see it happening more and more now with hotels, but just the hotels accepting the fact that guests want to use their phone to communicate right? Does not have to be an app. It can just be through WhatsApp. It could be through SMS, but I think a lot of hotels still miss that fact that. People just want to text and be like, Hey, what time does the bar close? Or the most famous one, I need more towels or what have you. And they don't wanna pick up the in-room phone.
And they might not be on property and they might remember that, oh, you know, and the best one I've seen lately, is hotels are asking me. We noticed your Do not disturb sign is on. We just wanted to make sure that you didn't need anything for us. Housekeeping is gone at five o'clock or what have you. Right. And just that little touch is, is to me, is just incredible because they, they've noticed now I know that they're aware, they know obviously that I did put the Do Not Disturb sign on. So that's a small one. But I think that's a baby step that every hotel should take. 
Tiffany Donato: We've had great results. Texting instead of emailing a survey. Correct? Yeah. If you text throughout the stay, you get the fee. Perfect example. Do not disturb and say, Hey, I just want water. Just throw some water bottles in there and then I'm good. 
Steve Carran: That's a good one.
Tiffany Donato: Thanks. What about you Steve? 
Steve Carran: Yeah, so we do a series with hotels, kind of similar to MTV cribs for hotels. So like we're planning a trip out and I've been calling a lot of hotels and I have been blown away. How many hotels I call and nobody answers. I am shocked that like not even the front desk, I'll call and find another number and nobody answers. I feel like there's so much technology out there, especially with AI and there's all this buzz about AI and how it's useful.
I totally understand, but there's so many companies out there that AI is so realistic these days that can handle those calls, so. This, I'm just one person calling. Right? And it's getting missed. I can't imagine how many calls are getting missed. And if you're looking to stay at a hotel and they can't even pick up your call, that for me, I'm just like, okay, well if you can't answer my call, like I'm not gonna stay there.
What's the experience gonna be like? So for me recently with what I've been doing, I think hotels that don't have anything like that or, you know, maybe aren't keeping a close eye on their phone systems or front desk phones, utilize AI if that's a problem. And, uh, have, have that kinda handle that call volume or any support you need in that, that area.
Tiffany Donato: That's a great one. It helps with the labor issue as well. Absolutely. Do you have an extra person at the front desk just handling phones or can you let them work with customers because. AI is helping at least screen some of those initial things. No, I like that one. 
Steve Carran: Absolutely. And when you go check into a hotel, a lot of the things that I notice is like when I'm checking in, a phone call's coming in, then they have to have that person on hold while they're dealing with me and there's four people behind me, you know? So have a technology like that so you can focus on the guest experience, but that's my 2 cents right there. 
Tiffany Donato: Great ones. I'll make sure both of those are bothering my chief uh, technology officer by the end of today. 
Steve Carran: Awesome. Well, this has been great, Tiffany. Great conversation. Our producer, Jon, he's been listening this whole time, so we are gonna loop him in here and let him ask the last question for you.
Tiffany Donato: Great. 
Jon Bumhoffer: It's been a pleasure to listen to the conversation. I feel like this was such a comprehensive deep dive kind of on the investment and growth side of things that we don't normally get. So that was a treat. My question is kind of tied into, you talked about a lot of trends and things you could do from the experiential side, but what are the things that you have done or that you have seen that have made the biggest impact, whether it's kind of you talked a lot about the focusing on, um, non-alcoholic beverages and stuff like that, but what are the things that you've seen that maybe aren't trends, but things that you have done in the past and you're gonna continue to do that? I've seen have had like the biggest return or made the biggest impact with guests. 
Tiffany Donato: You know, it's interesting. I would say if you look over a longer period of time, one of the things we really focus on, and obviously every hotel is focused on the guests who are flying in and staying there. We try to really make sure we also have separate programming that's very focused on locals and that helps drive, you know, we've got restaurants that are packed when the hotel is 20% occupied and you know, things like that.
We really try to focus on that and I think it helps both with. Business during slow periods, but also for the recommendations and for the word of mouth. So if you spend a little bit of extra marketing and a little bit of focus on, okay, who's eating lunch around here, or what are their offices, or what's a fun dinner we can do because we also want, that's then hundreds or thousands of people.
That say, Hey, when you come to town, stay at the St. Kate. I wanna meet you there for dinner, or, here's where I wanna meet you, or Here's what I wanna do. And that's runs the gamut of live music. We do a lot of live music nights at all of our hotels. It's a very cheap way to give exposure to local talent. It brings locals in it.
It gets guests staying at the bar, drinking alcoholic or non-alcoholic drinks a little bit longer, but it creates a little bit of a feel and a vibe and it's, it's hard to say, Hey, our best trend is vibe. But it does work on a business level. And that's why I always ruin cool conversations by talking about the ROI and the bottom line of everything, our marketing guys are like, you know, what would make you spend more on marketing? And I say, you have to show me. The ROI on spending those dollars in marketing. Obviously we all wanna be in cool spaces, but it has to translate. So I would say spending a little bit of extra ti uh, frankly, it's time more than money as far as social media has made, marketing and local marketing so easy to be compelling and consistent and ongoing communication.
And get that group of customers of like, who liked your post, who posted once they were there? Follow up with those people who are utilizing your hotel. That may not be staying there, but they're your best word of mouth and they're bringing business and money into it, beyond just the hotel guest who's flown in for a night or two, you get longer term business and value out of some of those locals.
And I think a lot of brands or managers may not focus on that as much. 'cause you're so focused on RevPAR, which is again, a huge driver. I'm a numbers nerd. The RevPAR changes the model more than anything. Uh, but I think for the longevity of that. The focus on local business and the people who are where you are really pays off.
Steve Carran: And kudos to you because I used one, I used to run a startup in Milwaukee and all of our client pre-dinner cocktails were done at Blue on top of the sister. Oh, yes. I mean, one of the best views in Milwaukee, and that's a place better, better than this one. Yeah, it's great. Yeah, and and that's a place where I feel like a lot of the community goes and has a drink before dinner or after dinner or something like that, but it's always packed whenever I go in there. It's a great spot if you're ever in Milwaukee. 
Tiffany Donato: If you can have a packed bar with an empty house. Now obviously you always want the hotel to be full, but every hotel has their their days that aren't. And if you can drive that consistent and repeat business, like I said, I think it really does. It sounds cool. It makes the vibe better, but it also in my world, makes the ROI more sustainable. 
David M.: Absolutely. Well, that does it for another episode of The Modern Hotelier. This is where Tiffany, you can let people know how they can get in touch with you or how they can find out more about Marcus. 
Tiffany Donato: Absolutely. It can be as simple as kind of searching for Marcus Hotels. It'll take you to Marcus Corporation and everything else there. But I'm also tiffanydonato@marcushotels.com is probably the simplest. And if you're in, oh, this won't post yet, so I'll be in Phoenix next week at the lodging conference, so I'll see a lot of people there. 
David M.: Well, that does it for another episode of The Modern Hotelier, the most engaged podcast in hospitality. So whether you're watching or listening, we appreciate you and we'll see you again soon. Thank you, Tiffany. 
Tiffany Donato: Thanks so much guys.