Newport’s Tarsadia Goes From Motels to Hotels, Now Looking at Condominiums, Timeshare Plans

Patels in the lodging industry aren’t unique,by one count, they make up 60% of hotel and motel owners of Indian descent here.

Typically, Patels own a Days Inn, Best Western or other motel or budget hotel. Some live there too, with family members pitching in at the business.

Few own anything like the Anaheim Marriott, a 1,033-room hotel next to the Anaheim Convention Center, or the posh Hilton Checkers in downtown Los Angeles.

B.U. Patel does.

He is founder and vice chairman of Newport Beach-based Tarsadia Hotels Inc., which owns 15 hotels across the country with another nine under construction. The Business Journal estimates Tarsadia’s yearly revenue to be several hundred millions of dollars.

Tarsadia is one of a handful of Patel-run lodging companies that have grown into the big leagues of hotel owners and operators. Others include New Cumberland, Pa.-based Hersha Hospitality Trust, Stonebridge Cos. of Denver and Georgia’s JHM Hotels Inc.

B.U. Patel and most other Patels hail from the western Indian state of Gujarat. The name is so common in lodging here some think it’s an Indian word for “hotel.” The name actually comes from ancient India for record keepers who used to track crops on a parcel of land, or a pat.

In more modern times, Patels became part of India’s merchant class. Many spread out to former British colonies in Africa before getting into motels here.

That was the case for B.U. Patel, who got his start in motels but doesn’t own any now. These days, his company is known for the Anaheim Marriott, Orange County’s second-largest hotel after the Hilton Anaheim, as well as the Hyatt Regency Orange County in Garden Grove and Residence Inn near Disneyland.

Tarsadia owns about 14% of the hotel rooms in and around the Anaheim Resort. The company also owns hotels in San Diego, San Francisco, Las Vegas, Denver and on the East Coast.

“When I was a small motel owner, I used to look at big hotels and want to own them one day,” B.U. Patel said.

He started out buying rundown or struggling Anaheim-area motels, turning them around and selling them for a profit.

Within a couple of years of buying his first,the Dunes Motel near Disneyland in 1976, B.U. Patel sold it and bought his second, the Princess Motel. And so on.

The deal that catapulted Tarsadia was the 1987 buy of the 225-room Radisson Hotel in San Diego, its first upscale hotel.

For the past five years, Tarsadia has been closing a deal a month, said Greg “Cass” Casserly, chief executive and president.

Casserly, who hails from Cendant Corp., joined in 1998. Unlike some other Patels in lodging, Tarsadia has opened up the company to non-family members, even non-Indians.

“We hire the best of the best,” B.U. Patel said.

In 1985, Tarsadia starting building its own hotels. In some cases, building made more sense than buying and fixing up hotels, according to B.U. Patel.

Now Tarsadia has 1,700 rooms under construction, including some in San Diego.

In downtown’s Gaslamp Quarter, Tarsadia is building a Hard Rock hotel. The $125 million project calls for an eight-story hotel, condominiums and shops. It’s set to open next winter.

Tarsadia is developing the hotel with Florida’s Hard Rock International Inc.

The company plans more hotels with condos. They could be sold to homeowners or vacationers as timeshares, B.U. Patel said. The projects are less risky because Tarsadia typically gets its money back sooner as the condos sell.

In Anaheim, Tarsadia has plans for a 700-unit hotel with possible timeshares on five acres on Katella Avenue.

Early on, B.U. Patel had the foresight to buy in OC’s developing lodging market, said Hitesh Bhakta, a motel owner, real estate attorney and friend of B.U. Patel’s going back to his days in Africa.

“He was one of the early members of the community who bought hotels in Huntington Beach and other places in OC,” Bhakta said.

B.U. Patel’s tack was simple: buy, upgrade, add rooms or a wing, or even switch from one motel or hotel brand to another. Then sell for a profit.

Tarsadia bought several motels and more hotels on the cheap during the early 1990s recession and later sold them for big profits, Casserly said.

Tushar Patel, B.U. Patel’s eldest son and Tarsadia’s chairman, led much of the buying.

The Patels sold off their last motel in the mid-1990s. By 1999, hotel buying more than doubled Tarsadia’s size to about a dozen hotels. These days, a typical Tarsadia room goes for $100 a night, a far cry from the $12 B.U. Patel charged at his first motel.

The company acquired Garden Grove’s Hyatt Regency in 1998 and soon after bought the Anaheim Marriott in early 1999. Tarsadia paid $75 million for the Marriott, which the company plans to hold onto, according to B.U. Patel.

Another local buyer and seller of hotels is the larger San Clemente-based Sunstone Hotel Investors Inc. Tarsadia sold the Sutton Place Hotel in Newport Beach to Sunstone in July.

“Most companies are either owners or operators but not both,” said Bruce Baltin, a senior vice president with Los Angeles-based PKF Consulting, which tracks the hotel industry.

Tarsadia still has a strong family flavor. B.U. Patel’s other son, Mayur “Mike” Patel is co-vice chairman along with his father.

B.U. Patel is the patriarch of an 80-member extended family, many of whom work at Tarsadia and its hotels. In all, Tarsadia employs about 1,500 workers.

Now 69, B.U. Patel said he decided to take a step back five years ago after years of working 12 hours a day, six days a week.

“My sons are doing so well,” he said.

B.U. Patel said he’s still involved in key deals and comes to the office regularly. He oversees administration, freeing Casserly and Tushar Patel to look for deals.

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Out of India, Then Africa

Bhikhubhai Ukabhai “B.U.” Patel said he made up his mind to leave his native Gujarat state when he was a kid.

“All my relatives who went overseas were highly prosperous,” he said.

His birthplace Singod, a farming town, had few homes, mud tracks and some phones. It’s about 10 miles from Tarsadia, the nearest big village and namesake of Patel’s hotel company. He owns about 100 acres of land in Tarsadia.

Patel graduated from college with a degree in commerce. After school, he ended up going back to his village to work on the family farm, cultivating beans and cotton for a couple of years.

Then came the chance to visit some relatives in Zambia, then known as Northern Rhodesia.

There, Patel drove a 10-ton truck and managed a stone quarry.

At the time, Africa was a draw for entrepreneurial Indians, who often started in agriculture and later became businessmen and shop owners.

“When I first arrived in Zambia, I thought I had arrived late because everyone I knew already owned cars, stores and money,” Patel said of his fellow expatriates. “I realized I would have to work harder in order to catch up with them.”

Patel’s relatives had done well importing and exporting clothes. Patel followed them into apparel. Initially, he, wife Pushpa and their three kids lived in one room with a small kitchenette behind their clothing store.

By the early 1970s, the Patels employed about 200 people at their factory, up from 10 tailors at the start.

But the welcome mat for Indians in Africa was wearing out. Uganda’s Idi Amin expelled up to 80,000 Indians and Pakistanis.

Things weren’t as drastic in Zambia, though Indians did bear the brunt of a Pan African nationalist movement there. “Zambia for Zambians” was the refrain of the country’s first president after independence, Kenneth Kaunda, who put in place restrictions that targeted Indian and other expatriate businesses.

Patel decided to leave. He left much of what he built in Zambia.

He and Pushpa took what money they could and came to the U.S. in 1976. They’d already sent their two sons ahead to stay with relatives.

The family bought a home in Irvine and a 20-room motel in Anaheim.

Like other Indians, Patel said he found lodging an easy business to get into and run.

“You work for your livelihood, which is also your house and office,” he said. “Besides, your family helps take care of it.”

,Purnima Mudnal

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Beyond Tarsadia

These days, B.U. Patel spends more time with his 12 grandchildren, raising money for schools in India and working on senior centers here.

He doesn’t have to spend as much time at Tarsadia Hotels Inc.’s Newport Center headquarters.

The company is now largely in the hands of sons Tushar and Mayur “Mike” Patel, as well as hired hands Greg Casserly, financial chief Ronald Adelhelm and Executive Vice President David Zeuske.

B.U. Patel, who also has a daughter not involved in the business, said he loves traveling with his family.

His grandkids range from a 1- to an 18-year-old.

In the 1990s, B.U. Patel and other Indian businessmen started the Sanatan Dharma cultural center in Artesia, known as Little India for its Indian shops and restaurants.

The center offers free medical testing and hosts events as well as language and scripture classes.

B.U. Patel said he prefers Orange County to Los Angeles County. Beverly Hills doesn’t come close to Newport Beach, said B.U. Patel, who lives in Pelican Hill.

Before settling in OC, B.U. Patel said he drove some 10,000 miles across the Sunbelt scouting for a home for his family. He never found anyplace he liked more than here, he said.

“It’s the weather,” he said, “just like India.”

Son Tushar, his wife and kids live with B.U. Patel and wife Pushpa. Other son Mike and his sister live close by, keeping with traditional Indian customs.

His father and his five uncles broke the walls between their adjacent homes in their native Tarsadia in western India, B.U. Patel said.

B.U. Patel said he admires the younger generation: “They are more knowledgeable, bolder and possess more daring than we did.”

Each year, B.U. Patel said he visits Tarsadia for a month, where he grows flowers on the family farm.

He said he is looking at buying hotels in Mumbai, formerly Bombay, and Delhi. Tarsadia also is eyeing Europe and China, he said.

B.U. and Tushar Patel are big givers to politicians in Anaheim.

Friend Hitesh Bhakta calls B.U. Patel a “fiscal Republican and a social Democrat.”

B.U. Patel said he supports the Republican Party with caveats.

“We’re definitely fiscally conservative thereby identifying with the Republicans,” Bhakta said. “But traditionally and culturally, we are very liberal in our outlook, probably something to do with Hinduism.”

A vegetarian, B.U. Patel watches what he eats and has lost weight in recent years. He does yoga and meditation for an hour and a half everyday. He said he’s completely devoted to Pushpa, his wife of 43 years.

“We have no secrets between us,” he said.

,Purnima Mudnal

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India Inn

Motels were a natural fit for Indian immigrants.

“Being family-oriented, they believe in staying, living and working together, pretty much like they would on a farm back home,” said Bay area hotelier Mukesh Mowji.

Indians are less than 1% of the U.S. population but own about 40% of the nation’s hotels and motels, according to the Atlanta-based Asian American Hotel Owners Association. Many got into the business in the 1970s and helped revive the slumping sector.

About 60% of Indian hotel and motel owners are Patels, like B.U. Patel.

Many financed their motel buys with minimum down payments and a loan given by the seller that had to be paid back on a monthly basis.

The Patels domination of the industry, chiefly economy motels, gave birth to the phrase “Motel Patel” in the late 1970s.

There was a bigger backlash. In the 1970s and early ’80s, some banks refused to loan to Patels after errant cases of owners setting insurance fires at their motels. Some non-Indian motel owners hung “American Owned” signs to play on a stigma about Indian-owned motels being unprofessional.

Patels often turned to each other for loans, essentially forming informal credit unions. The Asian American Hotel Owners Association, an industry group, also grew out of the early troubles the Patels faced.

B.U. Patel was among the first board members of the association.

Nearly all, 90%, of the association’s 8,000 members are Gujaratis,Patels to be precise, according to Mowji. Across the nation, its members own more than 20,000 hotels worth some $40 billion.

“That was the edge we had over other groups,we had a pre-existing social network hailing from the same area and cultural background,that we could use to leverage ourselves,” said Hitesh Bhakta, also a Patel and a friend of B.U. Patel.

Patels generally are known for their business acumen.

“It just stems from an independence to provide for yourself and your family,” said Mowji, himself a Patel.

Today, second and third generations of Patels are in the lodging business. They grew up as “motel kids.” Some don’t use Patel as their last name anymore, opting for more unique names.

In many cases, though, they’re savvier than their parents after going to college here. They’re often more ambitious, looking to expand into better hotels.

B.U. Patel said he hopes one of his 12 grandkids takes over the business from his sons.

He doesn’t say so outright, but you can sense he has high hopes for 19-year-old granddaughter Anjali, who’s studying business at Boston College. Like other descendants of B.U. Patel, Anjali uses Tarsadia as her last name.

,Purnima Mudnal

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TARSADIA TIMELINE

1976: B.U. Patel buys 20-room Dunes Motel in Anaheim

1978: Patel buys Princess motel in Anaheim

1980: San Clemente Motor Lodge bought

1985: Son Tushar Patel joins Tarsadia as chairman, chief executive

1985: Company begins building hotels

1986: Tarsadia moves into 19th floor of tower near South Coast Plaza. Patels had run business out of motels

1987: Company buys 225-room Radisson Hotel in San Diego. Marks transition from motel roots to hotels

1992: Buys slew of hotels, including two more Radissons, Holiday Inns

1997: Patels realize they’re growing too big, need to bring in outside professionals

1998: Greg Casserly hired as president, chief executive. Casserly comes from Cendant Corp., owner of Travelodge, Ramada brands. Buys the 313-room San Mateo Marriott

1998: Tarsadia buys 397-room Hyatt Regency Alicante, now Hyatt Regency Orange County, in Garden Grove. Adjoining office building bought for all- suites wing

1999: The 1,033-room Anaheim Marriott acquired, Tarsadia’s 16th hotel, largest to date

1999: San Mateo Marriott reopens after a $30 million renovation

2000: B.U. Patel steps back, handing reins to sons Tushar, Mike Patel, Casserly

2000: Buys Checkers Hotel in downtown Los Angeles

2002: Buys first Las Vegas hotel; Givenchy Resort and Spa in Palm Springs

2003: Signs deal to develop San Diego Hard Rock hotel, with condos

2005: Sees Anaheim-area rooms fill up with Walt Disney Co.’s 50th anniversary push