Teague Talks with Greg Kennealey, Peregrine Hospitality

Speaker A: We are their path to some level of economic prosperity for them and their families. That responsibility is massive and one we take very seriously. And if you keep that top of mind as a leader, it informs your decision making in a way that I think is super positive and super powerful. M.

Speaker B: Greg, welcome. Thanks for coming to sit down with me today again, for having me. Uh, everyone, welcome to Team Talks. Sitting down with Greg Keneally, CEO of paragraph and hospitality. Uh, I guess I should say welcome back.

Speaker A: Thank you. It's great to be here.

Speaker B: Second time we've done this.

Speaker A: Second time is the charm.

Speaker B: We did one of these already. But who was Greg Keneally? How did we get into the hospitality business? Give us the short Cliff Notes version, maybe. I'll tee you up. Born in Connecticut, black sheep of the family. Went to Notre Dame instead of Boston College.

Speaker A: Very much so, yeah.

Speaker B: And then where.

Speaker A: So I worked in the, in the technology consulting industry. Um, which makes no sense, but I did that right out of undergrad for a number of years. Was fortunate to go back to business school at Kellogg. Out at Northwestern where I studied, uh, finance and real estate. Got, uh, into real estate, private equity at, ah, LaSalle Investment Management in Chicago, which was great for foundational experience, office, industrial, multifamily. But was, um, fortunate to stumble into an opportunity, uh, to meet Lawrence Gellert, who, uh, was the CEO of Strategic Hotels and Resorts at the time. Strategic Hotel Capital. And, uh, long cat and mouse game of chasing to get finally 20 minutes with him in his office. I'll never forget, his assistant was so sweet and very patient with me as I continued to badger the heck out of her for that 20 minutes. I, uh, met with him in sort of a career mentor type conversation. At least that was the framework. My not so subtle agenda was get a job. And we. He gave me 20 minutes running around with his hair on fire. And then he basically said, thanks, nice to meet you. And I said, before you go, like, I just want you to know, like, if there's ever a chance to work here, I would be and I'd really welcome the opportunity to apply for a job. And he said, you seem like a very nice young man, but you don't know shit about hotels. And so I have no idea what you could possibly do for us. Which is. That was flattering. So, uh, but he said, but if you want, I'll introduce you to our chief operating officer, Richard Moreau. His office is down the hall, and if you can convince him to hire you, I won't object.

Speaker B: Awesome.

Speaker A: Yeah. So waving endorsement yes, exactly. Right. So Richard, uh, Moreau was crazy enough to take a chance on me. Uh, he's been a wonderful friend and mentor.

Speaker B: Were you at this time? How old were you?

Speaker A: I was 33. Yeah, 32. 33.

Speaker B: Begging for us.

Speaker A: Yeah. And, um, so anyway, I got into the hospitality industry late. Uh, and then. Which sort of started the love affair. I'll never forget. I was on the phone with my wife about Ritz Carlton Laguna Niguel in this, like, unbelievable resort, right. We're in a conference room overlooking the Pacific Ocean, and they're having a discussion with world class designers about how to redesign it to make it better. And I've never even been inside of a hotel as nice as it was pre Reno.

Speaker B: Right.

Speaker A: Like a Holiday Inn was a massive event for the Keneally family growing up. And so, uh, I was like. And then we go to. Then we eat at a Michael Mino restaurant, which they then critique. Right. Because they're thinking about changing it from Stonehill Tavern to Bourbon Steak, which we eventually did. I was like, I can't believe they're paying me to do this. Like, I'll do whatever you guys want. Like, if I get to work in these environments and have these conversations. It was unbelievably stimulating. And, uh, and I had the chance to work there for, yeah, almost six years.

Speaker B: Well, that's. I mean, that was strategic. And Lawrence Geller, one of the, um, I don't know, pioneers, but one of the very industry. So you're fortunate right now, incredibly, you work with. So you're fortunate to work with him, learn from him.

Speaker A: Yeah, a tremendous learning opportunity. Some of the best hotels and resorts in North America. And, uh, they had a very aggressive approach to value creation, which, you know, I was a junior guy with the laptop running around, but incredible learning experience. Tons. And then GFC takes the stock down below a dollar. Uh, you know, publicly traded company. A lot of pressure to reduce payroll. Uh, I joke. They were paying me so little that I didn't move the needle, so I got to stay. But then all of a sudden there was nobody doing the work. So actually they put me in charge of things, which was crazy. And, uh, all of a sudden I'm running, uh, their international portfolio, which is hilarious. As well as a number of properties in the United States. And, you know, it just sort of worked out.

Speaker B: Right place, right time.

Speaker A: Yeah, absolutely. Dumb luck.

Speaker B: So how long do you stay with Strategic? Because, yeah, they. Again, I love. I'm gonna Repeat below a dollar. Stock price. Below a dollar from, like, high of

Speaker A: 24, 25 down to that, you know, and they, you know, the good news is that I joined, uh, right before we had our first child. So, like, no pressure to hang on to the job. So. Yeah, so that was, that was really nice and relaxing for the Keneally family.

Speaker B: Okay, so. So that it comes to an end, Strategic, which is a great, Still a fantastic company.

Speaker A: Absolutely.

Speaker B: So then what?

Speaker A: So Strategic and KSL Capital had, uh, co invested a number of deals together. And when Strategic raised their, uh, fund three, um, they were looking to expand their hotel, uh, asset management team. And long story short, uh, I caught wind of the job. The folks at Strategic encouraged me to apply for it because they knew that that would be a better place for my sort of next phase of my career growth. There were no additional opportunities to move up in Strategic. And then Richard Moreau, the coo, called Mike Shannon and Eric Reznick and said essentially hire Greg. Um, which was incredibly, uh, fortunate for me and I've been part of KSL ever since. During COVID we had the conversation around, okay, what are the things that are going to take off post pandemic? Historically, select service has sort of fallen the least and bounced back the fastest because of the efficient operating model, et cetera. And so, uh, that turned into a business plan, which then turned into, uh, Eric Reznik, who's the CEO of ksl, and I having several conversations which ultimately led to like, I want to go do this. Will you back me? And they said yes, um, which was great. And so I had never led a startup. They'd never really back one before. Um, so it was a wonderful set, uh, of lessons learned for both of us. But, um, it was very much a startup, admittedly a very well funded one, uh, but a startup in a lot of ways. It was like, go find an office, come up with a name, set up a website, hire up a team. It was a wonderful, I mean, incredibly challenging, super exciting. We had some of the few startup moments, um, but hired up an awesome team. Many of them are still part of Peregrine today. Uh, so it was very difficult but very fun. Uh, you mentioned we bought 33 properties, a lot of them with your help. I mean, um, plug for your organization. But yeah, we bought 33 hotels in under, under three years, uh, across the country. About a billion dollars worth of real estate. And uh, yeah, so it's been, it was quite a journey.

Speaker B: So I'm gonna, uh, I got a bunch. But one, you m. Mentioned the name. I love it. Cause there's a story behind the Name, it's close to your heart.

Speaker A: Yeah.

Speaker B: So tell me that one again.

Speaker A: Sure. So we struggled. If you've ever named something, it's a nightmare, right, because all the good names are taken and trade lawyers and all this stuff. And we did contests and we hired a marketing group to help. And it was like, we're like six, seven months into this thing, and we had no name, which made it challenge to recruit. And I just sort of said, the hell with it, and I'm going to just figure this out on my own. And I was really struck by, uh, our industry in general, because, as you know, there are so many people in our industry. The majority of the people who work in hospitality are in that first or second rung of the economic ladder. And we're providing a path to economic prosperity for people who honest, smart and hungry and kind of climb. And this is especially true in the select service space because there's all these families that own the smaller select service hotels and the motels that are all across this country, many of whom came to the US with nothing, scraped and clawed and bought their first motel. And now the second or third generation, in certain cases, owns quite a few. And it's just a remarkable story. And I was struck by how that frankly ties back to my family and a lot of other family stories here in America, which is, you know, my grandparents came to this country as Irish peasants with nothing in their pocket and, you know, worked in jobs like, uh, laundromat, short order cook, housekeeper and mechanic, and scraped and saved. And my parents were the first in their families to go to college. And, you know, my brothers and I all were very fortunate to go to not only college, but grad school. And that is the same story that I see in our industry. And so Mission Hill is the name of the neighborhood in, uh, Boston. Excuse me, where my dad's family landed from Ireland. Ah, like a lot of other Irish immigrants back in the late 1800s and early 1900s. And the story of that neighborhood continues today. The ethnic groups have changed over the years, but it's very much still a little bit of a gritty landing spot for people who then climb and make a better life for themselves. And so the idea of selfishly sort of tying that, which means a lot to me, to the business that does that for so many people, it just made sense to me.

Speaker B: No, I love that story. That's why I asked.

Speaker A: So I appreciate that.

Speaker B: Thanks for telling that one again. So how has the world changed from 22, when we sat down four years ago, just A little day. Exactly. Right. I mean, isn't it just a little,

Speaker A: isn't it fascinating how it's remarkable? I mean if, uh, if, if you, if you learn anything from your time in hospitality, it's that whatever you think is going to happen is wrong. And uh, the need for agility is paramount. Right. And so, so interest rates went up 550 basis points. They've settled back down since, uh, uh, we had huge inflationary pressure on wages and everything else. Um, we've had lots of geopolitical, uh, turmoil and challenge and uh, negative impact on inbound travel of the United States. Once Covid was over, we were expecting all this inbound travel and then the world changed in a lot of ways and the next thing you know, we're insulting all of our allies and people aren't coming here anymore, which is, know, really painful for the travel industry. Um, you know, tariffs are impacting what we can do from a supply chain perspective on everything from food to couches. Right. So, um, yeah, it's uh, it's keeping us busy. It's keeping us busy and all of those things are impacting travel patterns. And, and, and so we have to be very mindful of how that's going to play out for our guests. Right. We're about to have World Cup. Is it going to be what we expected? Looks like not. And anyway, so yes, so lots of challenges.

Speaker B: So how is that impacting your investment thesis today? What are we doing? Are we buying resorts, drive to leisure or are we buying limited service select service? Yes. Yeah, exactly right, yes. Urban core, non urban core. Yes.

Speaker A: Look, I mean we have the benefit of a fairly broad mandate which is, you know, US hospitality, real estate. And I would say that the parameters for that are, continue to be, I should say, branded franchise select service hotels up through four and a half and maybe in a couple cases, five star hotels or resorts. But it's much more granular than that because to achieve the returns that we're looking for and that ultimately the investors are expecting, each investment has to stand on its own merits. It's not just a macro, let's go buy in bulk of this or that. And even at Mission Hill it was. Each individual asset has to stand on its own merits and the parameters of that are still like the foundational parameters of that is still similar. Right. It's fundamentally good real estate from a supply demand perspective. Um, it's value creation opportunities where we have conviction that we can deliver them in terms of elevating operational performance, elevating investment performance, capital infusion et cetera. And so, um, we're continuing to do that across all three of those segments and we're continuing to do that in a very selective way. So we recently, um, took on, uh, the Westin Resort in Hilton Head. Uh, we also now have the test, which is a boutique property in Atlanta, your hometown.

Speaker B: Love that property.

Speaker A: And a couple of others. So it's fairly selective and across all of those. But I would suspect that we would, we would be growing at a faster rate as I look to the next 24 months versus, you know, the relatively modest growth we've had in the prior 24.

Speaker B: Right.

Speaker A: Part of that is market, but frankly part of that is more about Peregrine's evolution and ability to be more acquisitive than we were before.

Speaker B: Talk to me about the integration between Mission Hill into Peregrine.

Speaker A: In April of 2024, Peregrine was, was born by integrating M. Mission Hill and another operating or platform company management company into what is now Peregrine, which directly manages or Asset manages 62 properties across the U.S. um, and so that involved combining organizations, cultures, leadership teams, geography, technology. And uh, that was quite a journey. Um, probably hardest thing I've ever done professionally. Um, but also frankly the most gratifying because you've got a good foundation in a couple of areas. You get to bring that together. You get to think about the art of the possible. And so we've been on that journey now for the last couple of years. As I mentioned, we added a few properties to the portfolio and there's been a ton of hard work and leadership, uh, changes and all the things. But now we're in a position, I think to grow more. Yeah.

Speaker B: So talk to me about the leadership because I think it's fascinating. So Mission Hill was fundamentally a startup, so you had to again, you had to get office space and then you had to hire a team from scratch

Speaker A: so that get the printer guide, at least as a printer. Because he didn't think we were legit and had we had no credit. Yeah, I was. Had to buy the deal.

Speaker B: I would have trusted you either. Yeah, fair. Um, and so you have to start from scratch and build a team, which is a trick. And then, then now that was in. Call it 2020. Now in 24 you have to merge two teams. That's a totally different skill set. So you have to bring. And now you've had a lot of changeover in leadership. You've got really talented people in there right now. Give me, give me some thoughts and some background behind that.

Speaker A: Yeah. So it's because I was, you know, sort of founder, CEO of Mission Hill. It was very tempting to just sort of say, well, you know, we did it the right way. Let's just. Let's just sort of Mission Hill 2.0, which would have been a colossal mistake. Um, although it was tempting at times because that's just what I knew. But the reality was that we had a vision for a much larger organization that did direct management. Remember, Mission Hill did not. And so we were primarily acquisition asset management. Peregrine is acquisition management, asset management and everything in between. And so the much broader set of capabilities required us to think, I guess I would say, more strategically about what we were doing and what we were trying to build. And so that involved a bit more thoughtful planning. And then as we looked at, okay, we want to have the core, the foundation we must have is best in class operations. And we have to do that recognizing this is the world we're in now in 24, 25. But, uh, more importantly, where are we trying to get to? And so we have added four new leaders to the executive leadership team. Kristin Richter is our chief commercial officer. Came to us from Fairmont Raffles. We, uh, have Heather Steggy, who's the chief operating officer, came to us out of the Quick Serve restaurant space, which a lot of people, um, raise a lot of eyebrows. But, uh, she's been absolutely fabulous and is bringing a really unique skill set and perspective and much more innovation, I think, to our business. Uh, Karen DeFulgo came to us out of Benchmark as our chief people officer. And Stacy Gallaghan, also out of industry as our cfo, came to us from Embark most recently, which is an accounting consultancy, but previously CFO of ah, Purebar and Smashburger. And so, um, uh, it's been uh, remarkable to get them onto the team and now see as they start to apply their playbooks and their experiences to uh, talent and recruiting and people process systems. And it's uh, been awesome.

Speaker B: I just have to uh, emphasize this. Five new outside female leadership team.

Speaker A: Four new. We had one, uh, Katherine Hance, our chief legal officer, but yeah, of our executive leadership team, uh, is uh, five women and two men, um, which was not intentional, um, but is fabulous, as you know. Um, you know, I've ah, I'm fortunate to have married up, uh, uh, to. With a very talented, amazing woman, Shannon. And we have three girls. So in my household, um, this has been very well received, um, dare I say expected, I'm the dumbest guy around the dinner table. But, um, but it's been, it's been awesome to see.

Speaker B: Yeah, I, I, I, I love it. And they're believing in you as much as anything and following your leadership just like you were following Lawrence before. So no pressure, no pressure at all there for you. But I, but you're doing fantastic stuff.

Speaker A: We are.

Speaker B: So what the heck is a peregrine?

Speaker A: I get that question a lot. So, um, yeah, the naming thing, I'm plagued. Um, so is this you in your basement again? No, no, no, no. So the peregrine is, is a falcon. Um, it is technically the fastest animal in the world when it dives for prey, which I learned through this process. I did not know any of this. When it dies, when it's expensive, when it dives for prey, um, it can hit speeds of 240 miles an hour. And so we went through this whole process. We want to come up with branding and a new image and identity. And so we hired the consultants and we go through the process and we spent six months and all manner of people wanted an opinion heard. And then, uh, and despite the dollars we spent elsewhere, we went back to the name that the marketing team recommended in the first place. So. And the idea was, you know, we're Colorado based, so like a bird of prey kind of has the outdoorsy thing going. Um, if you've ever skied Beaver Creek, there's a run named Peregrine, which is awesome. Double black. And it speaks to agility and speed and all those cool things so that marketing people, you know, want to drive the brand pillar. So they loved it. That was the, uh, that was the idea.

Speaker B: We just went to the exact same thing at Hunter and. Same thing. Yeah, same thing. Full circle. Everyone had to have an opinion.

Speaker A: Yes.

Speaker B: I'm a group think leader in general and we ended up back where we started.

Speaker A: Yeah. So, but the, the really good thing was, and you know this from building a team and a culture, like everybody needs to get up in the morning and put on the same uniform. Right. Like, it's got to have the same brand name on the chest or whatever. And so that was a really important part of the integration of the business. And starting up the new parts was like, okay, you're not the blank division. Like, we're all peregrine. Right. And so. And then we get the cool swag, of course, which my daughter steal from my closet. So anyway, yeah, it's been great.

Speaker B: Yeah. Because now you can put it on anything you want to. Yeah.

Speaker A: We got the water bottles, of course. Right. Pullovers. Yeah, Everything. Everything. Yeah.

Speaker B: Hats.

Speaker A: Yep. Yeah, we got it all.

Speaker B: We get the same.

Speaker A: We get it all.

Speaker B: Right, so what's the future of Peregrine?

Speaker A: So look, we are, um, very fortunate to be partnered with a global private equity firm. And, uh, you know, in the near term, we want to just be great at what we do and driving the performance of the existing portfolio as we've expanded out our capabilities and our leadership team and so forth. Um, I think we're now in a position to grow, like we mentioned, um, but the organization we're partnered with, which is global in scale, um, you know, I think enables us, if we earn the right to do so over time, with confidence to expand geographically. Um, you know, it wouldn't surprise me, uh, if in three to five years we're outside of continental U.S. um, you know, potentially to, to, to Western Europe, potentially to, you know, Mexico or Canada. Um, and so that, yeah, so that would be, I think, a natural extension of a growing hospitality platform. But our, you know, our focus, uh, for now is most definitely, you know, driving, driving performance and growth in US Hospitality.

Speaker B: So you've now built two companies. Talk to me about your leadership style.

Speaker A: As everybody in hospitality knows, it ultimately comes down to the people. Right? And so we have been incredibly thoughtful about who we hire into the organization. In fact, we talk a lot about, like, the most important decision we'll make is who we pick as teammates. So we are, we are very selective. Uh, candidates describe our interview process. Process as exhaustive, rigorous, a nightmare, whatever. Um, but we take it very, very seriously. And so we're looking for, at every level in the organization, we talk about we want people who are honest, smart, hungry. And when we talk about leaders, we're also layering on top of that several really important things. Uh, we're looking for leaders who frankly are incredibly capable, but whose natural stylus is one of humility. Because no matter what level you are in our organization, the work is ultimately getting done by the hourly employees. But we want people who philosophically aligned to the idea of a very demanding but very supportive coach. Right. So it's more of a people first approach. It's folks who are going to keep expectations very high, but then are going to work very hard to help the people on the team to achieve to that level. And, uh, if you've ever worked for someone like that, you run through walls for them, right? You'll give that extra night, weekend effort. If you've ever worked for someone who is the opposite of that, it's pretty awful. And they say people don't leave Bad jobs, they leave bad leaders. And so we're trying very, very hard to make sure that our leaders are the type of. That people want to work for because they know they'll be better at whatever they do as a result of working for that person. They'll get different career opportunities. They'll be encouraged to pursue them very much. Like Richard pushed me to go take the job at ksl. We just had our leadership forum up at the resort in Silverado that we have up in Napa Valley. And that was the theme. Right. Was this sort of character centered leadership and a people first approach to team building and team performance. Performance.

Speaker B: But I do think that's important because they are fundamentally following you.

Speaker A: You're the leader. Yes.

Speaker B: And they're following you. If they don't.

Speaker A: Which is a unbelievable privilege and an awesome responsibility.

Speaker B: And I think to your credit, I'll butter you up. But I think you've been. I mean one very successful but very bold.

Speaker A: Thank you.

Speaker B: Maybe unorthodox and uh, and a risk taker. So I don't know when you know how to take risks and when not. But that's what they're following.

Speaker A: Yeah, look, um, you know, ah. A leader without any followers is just a guy taking a walk. And um. And so when somebody puts their trust in you. Right. They're trusting your character and they're trusting your competence. You have to know what you're doing, but you have to be a good human being. And what we talk a lot about is that the 5,500 employees of Peregrine in our managed hotels, like the vast majority of those like entry level workers. Right. We are their path to some level of economic prosperity for them and their families. That responsibility is, is massive. And when we take very seriously and if you keep that top of mind as a leader, it informs your decision making in a way that I think is super positive and super powerful.

Speaker B: And I think just picking on sort of the next level down the Mike Wilbert. Who we're picking on, who we've watched grow up in this industry.

Speaker A: Yeah.

Speaker B: Who's now a leader.

Speaker A: Very much so.

Speaker B: But that's great. I think that's credit to you guys. Uh, to you personally. I think it's credit to you that all these people are like yes, let's go.

Speaker A: Yeah. Look, we've. I've been very fortunate to be surrounded by great leaders and you know it becomes sort of self perpetuating. Correct. Yeah. Which is awesome.

Speaker B: Follow them and people follow them and then we success and then more people want to be A part of it, yeah. And you keep going, you're managing all the Mission Hill assets and I'm guessing anything forward that you.

Speaker A: Yeah. So Currently Peregrine manages 46 properties, uh, select service portfolio, about 10 boutique properties, as well as a number of large resources resorts like the Sheridan here.

Speaker B: Do you like controlling your own management destiny?

Speaker A: I do. You know it's interesting about it is uh, obviously the, the majority of the, of our industry is set up where owner operator is separate.

Speaker B: Right.

Speaker A: And uh, you know we have a ah, structure that allows that to feel very much more integrated. I, I would define Peregrine as an owner operator for two reasons. One is the, the senior leaders co invest in the deals, um, so we are an owner in a true economic sense. And the other is that our incentive structure directly rewards a meaningful percentage of our employees through direct value creation through the investment lens. And so by virtue of being in that space and having no other clients, we spend no time trying to pitch management business to other ownership groups. We focus exclusively on maximizing the value of the portfolio that's currently entrusted to us. And by value I mean taking, you know, sort of growing EBITDA from here to here. And that's how all of our incentives are structured. That is our singular focus. We call it our true north. But by having that owner mindset and that owner alignment and having that as a singular focus, I think over time it just means everybody's going in the same direction. We can debate how to get there, but we have only one goal. It's not maximizing number of contracts under paragraph. It's maximize the performance of the portfolio. Um, and having an entire team aligned on that I believe over time allows us to attract and retain better people and allows them to do their best work. Um, as opposed to if you're an SVP of operations, you want to go run hotels, you don't want to be pulled into pitches. Um, as they would share with you, you were interviewing them. And so I think the cumulative effect of that is ultimately better results. So time will tell but that's, that's the thesis.

Speaker B: I just think it's a fun conversation, especially an interesting conversation, especially today given today's world because operations is tough, fundamentally brutal, very tough.

Speaker A: People who do that for a living are incredibly impressive.

Speaker B: Very impressive. And you know, hat off to Davidson and the other third party management companies that are absolutely, that's what they do

Speaker A: and they do great work not suggesting

Speaker B: otherwise, you know, best in class. And they're really good at the complicated resorts that they're Doing so on one hand you can make that argument and lots of sort of private equity and ownership groups do. No, no, we're going to pass that to third party because they know what to do. We're going to go work on fundraising and investing and asset management. And then there are other people that say, no, no, we have to have control of this so that we can do this, because we need to see everything that's going on and we can do it better. And let's. This will help our thesis.

Speaker A: Yeah. I mean, look, at the end of the day in hospitality you have, you have the benefit of a brand on your property if you choose to do that, versus independent. But every single hotel in every single market that anyone could own has competitors by definition who are in the approximate same location with a similar competing brand with similar amenities that offer sort of a similar guest experience. And so ultimately the only sustainable advantage that you can have in our space, there's no like black box technology or patent. It comes down to the people.

Speaker B: Right.

Speaker A: And so I believe very strongly that our model, over time, and we're still very young, but over time will allow us to attract the best talent, put them in a situation where they can do their very best and reap the economic rewards that come from that. And I believe that the flywheel, if you'll excuse the overused expression on that once it really gets going, will be really powerful.

Speaker B: I think you're right.

Speaker A: I hope so.

Speaker B: All right, let's go back to the, uh, sort of the economy and your crystal ball and where we're going. My crystal ball and, uh, investment, which we we've already said we're wrong. We've already acknowledged that we are completely wrong. But let's, I want to know what your investment thesis is for 2026 and beyond. Uh, again, the world is sort of uber luxury and, and that's where they're headed. And you guys are positioned, positioned there. But at the same time you've got, you've got everything. So where do you think your, your investment dollars are going to go? Are you bigger buyer today or bigger seller today? How about that question? A lot of people are bigger sellers today.

Speaker A: Yeah, I would say we're bigger buyers. Okay. Why? Several factors. Uh, one is if you zoom out a little bit and you take a longer term view, which we have the luxury of being able to do, um, the hospitality industry has proved incredibly resilient and if you look over, I think it's 60ish years that we're looking at the data recently, travel expenditure is growing. Our industry is growing faster than gdp, not just in the US but globally over the long term. And so that is a tailwind that we really like.

Speaker B: Yes.

Speaker A: It's also really hard today to build. Right?

Speaker B: Yes.

Speaker A: Development costs have gone up for a myriad of reasons. Um, it's getting harder and harder for developers. Um, and so there's a mitigant on supply at a macro level. Market to market, of course. Specific. And so those two things give us conviction to continue to believe in the long term resiliency of hospitality. And whether it's a global financial crisis or a global pandemic, everybody at those points that travel's done. And of course that was not true. So we believe that despite the bumps we're experiencing now, that the longer term trends are very, very positive. And it's true this time. This time it was different. Luxury stayed super resilient and everything else didn't. Which is remarkable. Um, we don't want to overreact to that and put all our chips in on a trend that is now sort of towards the top of the curve. Um, and so we will probably be selectively contrarian. What?

Speaker B: Give me more.

Speaker A: Um, so uh, look, the luxury properties that are for sale today, and you would know better than me, I mean they're trading at unbelievably low cap rates. And the only way you can justify that, particularly if you have opportunistic capital, is you have very lofty growth expectations.

Speaker B: Yes.

Speaker A: Which is a general rule. We would not. Or long term or a very longer term hold or a lower cost of capital can get you there. And those are, those tend to be the buyers and that's not the world we're in. So if we're going into luxury we have to have that real value creation. Belief in this is, you know, there's a different opportunity here that maybe others aren't seeing. There's a real estate play, there's an expansion opportunity. There's ways to additionally grow and amenitize the property differently. Um, but it goes back to um, do we have the ability to operate this fundamentally differently to drive real EBITDA growth? And the answer to that in many cases is no. And um, we just have to have the discipline to take a pass. But where we see it, um, we'll lean in aggressively. So we continue to look at drive to leisure markets, we continue to look at um, urban locations, but we're very careful around municipal risk or whatever the term is. Right. We want to be in places that are business friendly and travel friendly. That's obviously really important to us and what we do. Um, and so we're looking at a number of markets across the country and. But it ultimately comes down to the individual asset. And so it's. You can have all the academic theory, but you actually have to find things where the, you know, the stars line up. And our acquisition team led by Mike Wilbert, the other gentleman on the executive leadership team, you know, probably look at, I don't know, roughly 100 deals bid on 5 or 6, maybe by 1 or 2 like rough ratios to give you a sense for that. Um, so it's uh, it takes a lot of work to find the ones we really want.

Speaker B: So that's been the last. Those that metrics have been the last, I'll say three years, which has been tough. Do you think it'll be more bullish on that this year? Do you think you get more deals done this year? I think you will.

Speaker A: I think we will. Yeah. We're seeing. And obviously again, given what you do, you would you, you see it as well more than we do. But we're seeing the, the, the pipeline of the opportunities. Like we're excited about uh, growing and uh, you know we, uh, we, we are in. In active pursuit of. Of two right now, uh, that I think will close here over the summer and under loi. And so um, that happened to be in a drive to leisure market.

Speaker B: I was going to say. Tell me about as much as you can about those.

Speaker A: Yeah. Drive to leisure market. Um, um, we believe operational upside down select service. No, no.

Speaker B: Yeah. Full service we'd find in any select service. Because in your last sort of dialogue

Speaker A: we have, you know, we've bid on, We've uh, bid on a number in the last six, eight months.

Speaker B: Huh.

Speaker A: And um, you know, we, we come in second or third a lot. Um, yeah. But again the, the, the only, the only deal we don't want to do is a bad one. So like if we, if we don't win, that's okay. Um, better to, better to lose than buy something we regret. Regrets. So happy uh, to stay disciplined on that.

Speaker B: We, we, we talked about this before, but the transaction market is as active as it's been in a lot in three years.

Speaker A: Yeah.

Speaker B: Okay.

Speaker A: Which is, which is great to see.

Speaker B: Which is fantastic. There's some interest rate relief. There's plenty of debt out there. Plenty. So that's not the issue.

Speaker A: That's been helpful.

Speaker B: And um, and people kind of understand where value is today on the luxury side. They're, they're still finding that out because those haven't been on the market. So they're still figuring that out, in my opinion.

Speaker A: Correct.

Speaker B: Give me some other thesis that you like, whether it's markets or asset class or something that you like leaning into. And again, in my brain I'm thinking you've got Napa, you've got all the other ones that you've said. You've also got like AC and Clearwater. Which one do you think you're going to buy more of in 26?

Speaker A: So we have found a few other coastal uh, resorts, um, that we've taken a hard run at. Weston, um, and Hilton Head is an example of one that we got over the goal line. And that's congrats. But that's an example of, of a hotel in a supply constrained market. Lots of drive to leisure demand, where we saw a pretty material value creation plan. It's the better part of a $40 million renovation that we're about to embark on there that will really elevate the positioning of that property and do very much what we did here, which is make it even more attractive to groups, ideally, uh, higher rated and then layer in the smart leisure customers, you know, and manage those segments. So that's a wonderful example of what we'd love to do more of. And we're trying to find those in the, in the select service space. Um, we will continue to look for those hotels that are, you know, ac clear. What is a great example of this where there's operational upside and there's value creation through things like F and B. Right. There, there's a, there's the, I guess non prototypical premium branded selects that are, that are operationally select service. But the guest experience pushes into a pretty nice full service. Right? Experience. Right. It's a comfortable room, it's got some level of F and B offering. It's got a decent fitness center, fast WI fi, like for a lot of people that's great. Like I don't need to pay more for things I'm not going to care about or not going to value. And so I love that positioning because I can also flex with the seasonality. Right. The customer in Clearwater in March, April is different than August. Right. And so you flex your pricing accordingly. And in those boxes that math continues to work really, really well. So uh, yeah, I continue to have a love affair with select service. I think uh, it's a fantastic business because the value proposition to the guest when you deliver it right is really excellent. And that customer can be as satisfied with that experience as the Customer paying a much different number to stay at our Fairmont, uh, up in Del Mar, California, where they have access to golf and equestrian and spa and everything else. Um, and so you just have to be. You just have to know your customer and make sure you're lining up your product according to accordingly. And so we're looking for both.

Speaker B: I love that. And again, I think there's plenty on the market right now that you can go buy. There's plenty of really new, shiny, nice, limited service, select service assets out there that you can pick up. There are, uh, they're not cash flowing today at the levels that the sellers want at the replacement cost.

Speaker A: Sure. But that may create opportunity for us.

Speaker B: I think there's, uh, a lot of opportunity there.

Speaker A: The one. You have to remember that the legacy of the organization, if you go back further, was in the operationally complicated. It was in the larger box. It was looking at all aspects of the real estate, how to make that work harder, how to drive profit out of each individual department as if it were standalone and bringing that discipline to bear. And we do that at large resorts like this one. I know we'll take a walk in a little while, but the DNA or the playbook of that continues to run deep. I mean, we have the most unique hotel or resort in all of, I think, our history at, uh, Camelback, which I'm heading to later this week out in the Poconos. But it's like the most successful ski hill in the state of Pennsylvania with a conference hotel, an indoor water park, an outdoor water park, nine food and beverage outlets like zip lines and mountain biking. And it's incredible, wonderful, um, experience, uh, for the 50 million people that are within a driving distance of. Of that property. But when you take the team that is optimizing that, and then you say, okay, now apply it to another resort or even a select service hotel. Like, obviously, the part about maximizing skier visits changes, but like, the. The underpinnings of that are similar, and. Which is one of the things I love about hospitality. Like, everyone is different, but we really think we're good at that, and we think we can apply it in a lot of different places, which makes my job super fun.

Speaker B: So I love it. So let's transition to where we are today, because everything you just said applies to here.

Speaker A: It does. Indeed it does.

Speaker B: So tell me where we are today.

Speaker A: So we're the Sheridan, uh, San Diego Resort, uh, which is located on the beautiful marina. If, uh, you can see out behind t. Yes. Um, we'll. We'll Walk and talk later. Uh, this is a little over a thousand keys, uh, 33 acres, uh, right on the marina. And, and we bought this in 2019. So interesting timing. Um, but the thesis here was this was at the time a very dated conference hotel or airport hotel is how you would have defined it. And our vision for this property, and I wasn't necessarily part of this, but the folks who originally bought it, so Dan Rowan would deserve full credit for this. The vision for this was we're going to change this into a coastal California resort. So same box, same location by definition. But the transformation 110 million later has been unbelievable.

Speaker B: Uh, it is fundamentally irreplaceable real estate.

Speaker A: Oh absolutely. We're right on the marina. You're a hop skip to the gas lamp district and the ballparks and everything else that makes San Diego amazing. Beaches are right up there. Um, and we are effortlessly proximate to the airport. Uh, the naval base is right over that way where you get to see all the, you know, all the helicopters taken off and all the action, uh, from, from the views that we have out of every room, uh, in the building. So yeah, it's a pretty, it's pretty, pretty special place.

Speaker B: So it's an, I'll say it a different way, it's an asset that can accept capital. Except that 110 million is not, not a small check.

Speaker A: Small check, no.

Speaker B: And I guess the REITs, you bought it from home Post and I guess so the REITs aren't, aren't really set up to be able to do these types of lifts. But you guys are, for whatever reason

Speaker A: they, you know, they didn't want to do that and we, we did and um, it's worked out incredibly well. Um, you know, this is a, this is a hotel that does 300 over 300,000 room nights a year. Um, and so you know, roughly 130ah, group, uh, but now at a much higher rate, uh, and higher profile than, than before. Um, 130,000 transient, leisure oriented, transient, uh, and then about 50,000 of more corporate and crew just given the proximity. So we've got to try to be, uh, sort of servicing lots of different groups and their preferences. Um but we have, right out here is the marina. There are people doing yoga on the lawn, watching the boats coming in and out there. We can, you know, we can, we can take you out for jet skiing or paddle boarding, we can take you out for a boat ride and if you want to pile in a bus and go down to the ballpark or the gas Lamp like we can take care of that too. And it's 10 minutes away, so it's a pretty great spot to be able to service all those groups and very family friendly as well.

Speaker B: So has it worked?

Speaker A: Yes, yes, most definitely. Yeah, yeah, yeah.

Speaker B: Happy that we spent 100 million. That was worth it. It's proven its concept. Absolutely. The thesis is right. Execution worked.

Speaker A: Yes, execution was fantastic.

Speaker B: I mean, cheers to you. And I was here last night and boy, I think the place is slap full.

Speaker A: It's 100 occupancy.

Speaker B: Last night would not makes total sense. I mean, it seemed like there were three groups that were in here running around.

Speaker A: Yes.

Speaker B: All yesterday.

Speaker A: Yeah.

Speaker B: And some families and a wedding and I mean there's just everything happening. Which cheers to you guys.

Speaker A: Yeah, well, with it, I mean, when you have this size property, you can have disparate groups doing different things and all feel like they kind of have the run of the place. Yes, right. And the, and the, the, the, the bridal group, we do a ton of weddings here. Like they can have their rehearsal dinner in one place, like the ceremony in another, the cocktail party in another, the dinner reception in another, and the brunch the next day in another and have all of them feel distinct and not have to leave the campus, which is fantastic. And of course we want them to stay.

Speaker B: Right, of course.

Speaker A: But, um, it's a great experience and uh, and families are loving it as well because you're, you know, your hop skip up to the aquarium and the zoo and all that, so.

Speaker B: And the weather doesn't stink either.

Speaker A: No, the weather does not suck.

Speaker B: That's great.

Speaker A: Yeah.

Speaker B: Um, Greg, this is fantastic. Thank you for sitting down with me.

Speaker A: Oh my gosh. My pleasure.

Speaker B: Um, I can't wait. Let's go walk this property. I want to show me all around. We'll take the cameras. We'll show you guys round two. Um, I'm impressed. This is great, great conversation. Thanks for sharing your knowledge and listening.

Speaker A: Oh, my pleasure. Thanks for having me. Appreciate you sa.