You see him at every major hotel industry event. People recognize him instantly, and for good reason. Paul Novak has a long and successful track record in this business. Novak was instrumental in developing the hugely successful Courtyard by Marriott brand in the late-'80s, and also grew the Residence Inn brand. He also was director of real estate at La Quinta Motor Inns in the late-'70s. After nearly a year as executive vice president, acquisitions at Patriot American, he recently opened up in a one-on-one interview.
Q: What are your day-to-day responsibilities? Novak: I'm responsible for all of the growth of the company primarily on individual asset acquisitions or small portfolio acquisitions. That ranges from acquisitions of existing properties that are going to be converted into one of our proprietary brands or new development of one of the proprietary brands.
My focus tends to be more directed toward the brand and growth of the brands. We've really established now fairly concrete categories of product and brands that Patriot American/Wyndham International is going to focus on with the luxury group, including the Carefree Resorts, which is a five-star luxury resorts and Grand Bay Hotels which is primarily urban luxury five-star hotels, and that operating group has been merged into a single operating group now. And we support the development and growth through acquisition for that group. Then there's Wyndham Hotels and Resorts, which is our more traditional full-service, high-end resorts and hotels which also includes Wyndham Grand Heritage, which is a full-service four-star product with the same service, quality and amenity levels that you will find in a traditional, more contemporary Wyndham, the difference is it's in a classic, historic structure.
The next level is our Wyndham Garden product, which has really elevated itself to more of what I would call a small full-service hotel that is typically now ranging from 180 to 250 rooms and it really is filling markets where there's a stronger need for a full-service hotel but you can't support a 350-room hotel with large meeting space. The market's incredibly strong for that product right now.
Then on the extended-stay side, we should be closing on Summerfield Suites, which also includes Sierra Suites. We will be merging the development responsibilities for Summerfield and Sierra Suites into development activities for Patriot American Hospitality and will serve them as a business operating unit to provide them with growth as well.
Q: Do you have specific targets in mind or are you looking for deals as they come along? Novak: We have a five-year growth plan that we've put together for each of the product lines. The plan is not only targeting number of units, it's targeting specific markets and submarkets where we have high priorities for growth. So we have a very focused acquisition and development program. We know where we want to be over the next five years, precisely to the submarket. We don't spend a lot of time looking at things that don't fit within that plan. That allows us to be not only reactive to things but also to be very proactive in targeting the places where we know we want to be in order to grow the system. We know what we're looking for. The rationale behind that is distribution, concentration of units in a market, penetrating the major core markets that create linkage between major metropolitan markets so that a customer who stays in Chicago in certain market areas who also is probably traveling to Washington has the opportunity to stay in a Wyndham Garden.
Q: What do you like most about your job? Novak: Certainly the excitement of the company and its continuous growth. When I joined the company, it actually was just reaching the $2.5 billion range. By the time I get to my first anniversary it will be about $7.2 billion with the closing of Interstate. So, a lot of growth, and that makes for a lot of excitement. It also makes for a certain degree of confusion at times because of the amount of activity that's going on. The integration process has been probably the most challenging. One of the things that is certainly the most exciting characteristics is that we have been acquiring companies with a very high quality level of people. We have not been acquiring companies or entities where we were going to put our own people in and turn those companies around. We are buying companies that are world-class companies. So we're constantly building new relationships with people who we really like and I've had the privilege of working through a lot of those. It's a dynamic company where I think we've created a real long-term and short-term vision.
Q: Does Patriot have a goal for spending or a war chest of a certain size? Novak: As we've put together these goals and strategic plans, we're getting there. We will be looking at fairly dynamic growth numbers on individual growth of the brands, probably ranging depending on the brand anywhere from 10 to 25 units per brand. That will come gradually. The dollar amount could range anywhere from $1 to $2 billion (a year) in acquisitions and development, depending on the mix of the various products that we do. So clearly we have a dynamic growth plan, and I think the best way to describe where we are is what Wyndham International and Patriot American is at this point is a company that has the quality brands that Marriott has today but we have the growth potential that Marriott had back in the early-'80s because our brands are not fully developed. We've got tremendous growth potential. Courtyard just opened its 300th hotel. We have 60 Garden Inns.
Q: Your integration has seemed to go rather smoothly. Why have many of your acquisitions been smaller rather than blockbusters? Novak: Arcadian is a good example. Instead of going out and trying to create a European operating division from scratch, we went out and tried to find not a huge company but a small company that had very high quality executive management, understood the hotel business, related well to us as individuals and understood branding, and basically acquired a company that we just gave the name to, Wyndham International European Division.
We've grown fast, we've grown smart and we've grown with a real strategic direction and we've grown with people that were very easy for us to integrate.
Q: How do you view the present-day hotel investment climate? Do all of the deals make sense? Novak: People are doing things out there that don't make sense to us. That doesn't mean it doesn't make sense to them. It clearly does or they wouldn't do it. We consider ourselves to be fairly smart, and we have a hard time sometimes understanding when we believe we're as good as we are, both as an operating company and as a real estate company, in evaluating assets and establishing value both existing and future, where we can be so far off in our values. We're going to continue to buy smart and strategically. and if we can't come up with the rationale as to why an asset is being valued or priced at x, then we simply won't get there and we'll slow down our buying. We'll supplement it with some other methods of growth by getting into other related businesses that are in the hospitality end or continuing to focus on the performance of our existing businesses. The worst thing you can do is to buy and not really believe in the economics of what you're buying.