304 | ‘This is Huge’: Choice Hotels makes history with Black-owned multi-unit deal

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BLACK HISTORY BOOST: St. Augustine, Florida, honors civil rights leader Andrew Young, who in June 1964 was beaten by members of a white mob when he led the Night March through the city to quell riots as Congress debated the Civil Rights Act. The city named the path Andrew Young Crossing in recognition of its place in the Civil Rights Movement. Today, Black hotelier Fred Washington is making more history as he plans to build three hotels in the historic city.

Franchiser, supporters hope agreement inspires more minority investment and boosts diversity in business and tourism

From its beginning, St. Augustine, Florida, has figured into African American history.

The coastal city is the nation’s oldest European settlement, established in 1565 by Spanish soldier Pedro Menéndez.

Joining Menéndez were African explorers. Two hundred years later African Americans in the 1730s, established a legally-sanctioned free settlement and joined the Spanish in defending the territory.

Two hundred years after that, in the 1960s, African Americans demonstrated through peaceful sit-ins and marches in the name of civil rights.

In June 1964, Andrew Young, at the behest of the Rev. Dr. Martin Luther King Jr., led a nighttime march from Lincolnville to Constitution Plaza. The event was to quell riots as Congress debated the Civil Rights Act. Young and other marchers were confronted by a violent mob. Young was beaten but did not fight back. Instead, he picked himself up and rejoined the civil rights marchers. Today, the landmark area is christened Andrew Young Crossing.

St. Augustine today commemorates and honors those who overcame racial barriers and added to the rich diversity of the city’s culture and economic health.

This year, Fred Washington of Jacksonville, Florida, will make even more Black history in St. Augustine when he breaks ground on a dual brand there.

The project is the first phase of a first minority-owned multi-unit franchise agreement

with Choice Hotels International.

HISTORIC DEVELOPMENT: Choice Hotel International and its emerging markets franchising division made company history in October when it signed its first Black-owned multi-unit deal with Fred Washington, center, of Southern Accommodations in Jacksonville, Florida. Episode 304 of Lodging Leaders podcast covers the significant deal and what it means to current as well as prospective African American hoteliers. Not even the coronavirus pandemic could curb the enthusiasm of those involved as they closed the deal to build six Choice-branded hotels in Florida in the cities of St. Augustine, Fort Myers and Ocala. Pictured with Washington are, from left, Jason Cowan, senior vice president, franchise development, signature brands, Choice Hotels; John Bonds, senior vice president, enterprise operations and technology, Choice Hotels; Pat Pacious, president and CEO, Choice Hotels; Hemant Patel, regional vice president, franchise development, Florida, Georgia, and the Caribbean; and David Pepper, chief development officer, Choice Hotels.

‘Incredibly Blessed’

Washington’s company, Southern Accommodations, plans to build a Comfort Inn and MainStay Suites combo in St. Augustine, followed by a Sleep Inn.

Next in line are a MainStay Suites and Comfort Inn in Fort Myers and a Sleep Inn and MainStay Suites in Ocala.

The multi-unit development agreement is notable in several ways.

  • Washington is an African American real estate investor entering the hotel industry for the first time.
  • The deal is the largest minority multi-unit franchise agreement executed in the history of Choice Hotels’ emerging markets franchise-development program.
  • And NashBuilt, which will construct all six hotels, is also minority owned. Co-founders are Nash Patel, president, and Jay Patel, chief operating officer. They are also charter members of AAHOA and each served as chairman of the association. Nash became certified as general contractor in 2018 and will lead the Choice-branded projects.

“I am incredibly blessed and thankful for this opportunity,” said Washington.

The development project came about five years after Washington first met John Lancaster, regional vice president of emerging markets at Choice Hotels.

Washington, already a seasoned commercial and residential developer after nearly 20 years as a senior analyst with the U.S. Department of Housing and Urban Development, attended his first NABHOOD conference in Miami.

The National Association of Black Hotel Owners, Operators and Developers is dedicated to paving the way for African Americans and other ethnic minorities to build generational wealth through hotel ownership and investment.

Choice Hotels is an avid supporter of NABHOOD, where Lancaster networks with prospective franchisees as well as teaches members and event attendees about the fundamentals of hotel ownership, development and management.

“Fred signing these is huge in the fact that a minority owner in Choice of this magnitude has never been seen before,” Lancaster said. He hopes the deal will serve as an inspiration to others considering hotel ownership.

Choice Hotels established its emerging market division 15 years ago based on a mandate from chairman Stewart Bainum to target minorities who are under-represented in the hotel franchising industry. During that time, Choice Hotels has signed 250 franchises to minority owners.

CHOICE INFLUENCE: The National Association of Black Hotel Owners, Operators or Developers or NABHOOD in 2019 gave Steve Joyce, center, an award in recognition of his contribution to diversity and inclusion in hotel franchising. Joyce was CEO of Choice Hotels International from 2008 to 2017. He is CEO of Dine Brands. Also picture are, from left, Jay Patel, a hotelier, COO of NashBuilt Construction in Pensacola, Florida, and co-founder of NABHOOD; Andy Ingraham, co-founder and president of NABHOOD in Miami; and Norm Jenkins, founder, president and CEO of Capstone Development, a hotel company in Chevy Chase, Maryland.

Red Pill Blue Pill

Washington is founder of Southern Accommodations in Jacksonville, Florida. He will be majority owner of the hotels.

He formed the company as a REIT that invests in businesses such as grocery stores and health care facilities in underdeveloped communities in Florida. As a senior consultant with HUD, he helped steer affordable housing programs and other forms of economic development to serve working-class families.

Despite his knowledge of commercial real estate and community development, Washington said he’s learned that the hotel business “is a completely different bird.”

A few weeks after meeting Washington at NABHOOD in Miami, Lancaster traveled to Jacksonville where the two had lunch and discussed what it takes to step into the realm of hotel ownership, investment and development.

Lancaster is a fan of the feature film “The Matrix” and he refers to “what I call my Morpheus moment.” In the movie, Samuel Jackson’s character, Morpheus, is speaking to Keanu Reeves’ character, Neo. He offers Neo the choice between a red pill or a blue pill. Taking the red pill opens the door to a new level of being and understanding.

Washington took the red pill.

“When I’m speaking to someone about the hotel industry and the robust opportunity and just the feeling of welcoming from a hospitality standpoint, once you learn about it, you can’t go back,” Lancaster said.

LISTEN: SHARING THE WEALTH: Episode 284 of Lodging Leaders podcast includes John Lancaster of Choice Hotels International in a report about industry efforts to attract Black hotel investors as well as the obstacles the prospective owners face.

Over the next five years, Lancaster and others taught Washington the fundamentals of developing a hotel and managing the business inside the bricks-and-mortar investment.

Learning what it takes to build one hotel is monumental, but six is the industry’s Mount Kilimanjaro.

Lancaster and Washington found the prospective development sites in St. Augustine, Fort Myers and Ocala.

The selected markets are where Choice Hotels believes Black travelers are under-represented.

Recently, MMGY Global performed a study for Choice Hotels that Black leisure travelers spent more than $109 billion in 2019. That accounts for 13 percent of the leisure travel market in the U.S., Lancaster said.

“That report also found Black meeting professionals plan on average seven to seven and a half meetings a year, spending almost $1 million,” he said. But not every market is eager to attract their business.

Of the meeting planners surveyed, 84 percent said some destinations are more welcoming than others to Black attendees. “Forty-two percent say that their attendees have felt unwelcomed in a destination in which they’ve attended a meeting in the past,” Lancaster said.

As a result, Black meeting planners go out of their way to search for destinations with marketing materials that specify they welcome diverse cultures and they analyze the area’s diversity and multi-cultural environment.

Community Stakeholders

For his hotels, Washington selected cities where he wants Blacks and other people of color and various cultures to feel accepted, welcomed and respected.

Given his background in privately developing housing and businesses that lift up communities, Washington said, “My passion is to involve stakeholders who generally aren’t invited to the table.

“I noticed that with HUD, for the 18 years I was there, I was involved with many through the federal government. And I noticed that most of the projects were in very low-income communities, many communities of color. But in terms of the ownership, there very few people, very few stakeholders of color or very few stakeholders that came from the community, the sponsor community.

“I’ve always had a passion to involve and bring others to the table because when you involve people who live in the community and make them stakeholders, you change the course of not only that family, but you changed the course of the community.”

When a community is invested emotionally, intellectually and financially in an improvement project, they go from having a consumer mindset to one of ownership, Washington said.

“I see this as an opportunity to not only get there myself, but to bring as many as possible as the Lord will allow to the table as well.”

ALL FOR ONE: Choice Hotels International in December launched an African American owners alliance to provide guidance and support to Black hoteliers. Fred Washington, top row, second from left, is vice president of the alliance. Other members are, top row, from left, Robert Nesbitt, alliance president, Chanel Grant and Zane Major. Bottom row, from left, Michael Ringwood, Larry Tripplett, Dr. Andrea Williams and Reggie Winfield.

Alliance Formed

Choice Hotels has nearly 6,000 hotels in the U.S. Of those, just 1 percent are owned by African Americans.

To change the equation, the franchiser in December launched the Choice Hotels Owners African American Alliance to provide guidance and support to Black and African American hoteliers.

“Our goal with this is to provide an ongoing forum for Black and African-American franchisees to engage directly with Choice leadership and emerging markets team in the development and the execution of our key initiatives,” Lancaster said.

“We want to ensure that Black and African-American hotel owners are fully engaged in all the benefits associated with owning our Choice-branded hotels.

“We want to incorporate Black and African-American owners, hotel, employees and vendors into the Choice hotel system, collaborating in recognizing the importance of the Blacks and African-Americans in the overall success of the company.

“This actually complements our existing enterprise-wide directive and return on investment of Choice diversity and inclusion. And we also use it to advise and facilitate communication, innovation ideation, creative activity and decision-making.

Choice also provides incentive financing to new minority franchisees, up to $1,500 per key for a total of $125,000 per hotel.

Besides working with Lancaster and other Choice Hotels leaders to develop his first hotels, Washington has teamed up with Jay Patel and Nash Patel, brothers and co-founders of NashBuilt Inc., a hotel construction company in Pensacola, Florida.

Nash is a former chairman of AAHOA. He became certified as a general contractor in 2018 after deciding he wanted to build hotels for others.

Jay was also an active leader in the association. He also wrote a book titled, “Franchising: Is it Fair?, which AAHOA leadership had used to negotiate better terms for their members with franchisers, including Choice Hotels.

Besides serving in AAHOA leadership, Jay Patel also is co-founder of the National Association of Black Hotel Owners, Operators and Developers or NABHOOD and has worked with the association to recruit and educate minority ownership and investment in the hotel industry.

As Washington has quickly learned, the key to hotel financing today is relationships. Nash Patel talks about the value of finding like-minded business people and prospective investors through association memberships.

“With mine and Jay’s relationships not only with the Indian community, but also with the African-American community and everything that Jay’s done with NABHOOD, one of the things that we bring to the table is relationships,” Nash Patel said. The relationships are valuable when seeking passive or limited partners to invest in a hotel fund.

While hotel development continues through the coronavirus pandemic, Jay Patel said he’s seeing a difference in financing strategies during the crisis with long-term conventional lenders sitting out and short-term debt providers stepping in with three- to four-year terms.

Traditional lenders such as banks have heeded Fed Chairman Jerome Powell’s outlook that the economic recovery from the harm caused by the coronavirus crisis will take 18 months to two years to stabilize.

NashBuilt is mostly focused on building hotels and it’s done some projects for first-time owners such as Washington. And, given Jay and Nash Patels’ roots, the construction company is especially keen on helping minority investors build wealth through franchising and hotel development.

Jay Patel said many of its clients were not in the hotel business before turning to NashBuilt for help with their projects.

In educating new investors and developers, Jay said, “we represent the same philosophy that we had at NABHOOD over 20 years ago, doing what we call the ABC’s of hotel ownership.

“I’ve always been an advocate of guys like Fred, who came to NABHOOD a couple of years, saw what we were presenting, what we were teaching [such as ] how to get a feasibility study done and how to negotiate with the franchise or how to talk to SBA financiers. Those are some of the characteristics that we teach people who are interested and have the passion and have the vision to want to go into their own business.”

LEARN MORE: To see and hear more of Long Live Lodging’s coverage of diversity, inclusion and equality in the hotel industry go to www.longlivelodging/diversity.

He noted that although $280 billion a year are spent by African Americans in the tourism industry, few owned hotels.

“The Asian Americans were taking the lead,” he said. Knowing the recipe to the secret sauce of hotel portfolio growth, Jay Patel led NABHOOD to “copy and paste what the Asian Americans have done. Come together, group together and learn the business and build your wealth.

“I’m happy to say over the years, we’ve got more than 650 NABHOOD hotels that are tapping into what we call Black tourism.

“One of every 10 people that walked into NABHOOD’s door have become successful.

“It’s all about inclusion. This industry is open to anybody that has a vision, that wants to learn.”

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