Investing in coastal properties has been a no-brainer for Pacifica Hotels ever since 1993, when it got started in Santa Barbara as the hotel investment and management wing of private equity firm Invest West Financial Corp.
Pacifica, which had between $110 million and $125 million in 2013 revenue, shifted its headquarters staff of 35 to Irvine last year, a move intended to boost its prospects for recruiting top talent, according to the company.
Now it’s beefing up marketing for the hotel management services it offers to other operators. That’s part of a growth plan that comes as its continues to work its way through a raft of improvement projects and switches from branded hotels to boutiques for several properties in its portfolio of 25 hotels that are mostly in California.
“We’ve always focused on coastal assets, and that’s been our bread and butter in the hospitality business,” said Pacifica President Matt Marquis. “We’re into more of the coastal, beachy motel-hotel feeling, where you go into a room and there’s seahorses and seashells. We wanted to take that up to a more modern feel, definitely capitalizing on the boutique aspects and pumping our brand to three-plus diamond or star.”
Three Properties
Three of those properties are undergoing major renovations this year, a to-do list that’s expected to cost more than $40 million.
About $22.5 million is being spent on the 160-room Marina del Rey Hotel to transform it into an upscale boutique with a full-service restaurant, a pool facing the marina, and an outdoor space for weddings.
The renovation is expected to be completed by summer.
Pacifica also is in the midst of a $13 million renovation of the 111-room Sunrise Hotel in Redondo Beach, also expected to be completed in the summer. It’s taking the Best Western flag off the property—a trend that’s being noted across all major brands as operators look to add value by going independent. That “de-flagging,” as it’s known in the industry, was also done last year to Pacifica’s Fireside Inn, formerly a Best Western, in Cambria. In San Diego, $5.2 million is being spent on room renovations, among other improvements, at the 126-room Blue Sea Beach Hotel, another former Best Western. That project is slated for completion in May.
The point is to give each of the properties points of distinction in their markets—something with a one-off feel compared to a chain, at a lower price than high-end competitors.
“A lot of our stuff has been perceived as a good value and still is,” Marquis said.
“We’re still giving value to our customers and clients for an amazing room, amazing locations. They’re just not all the frills of a Ritz.”
Marquis’ father, Dale, started Invest West in 1970 and eventually consolidated its hotel investments and management business in the spinoff of Pacifica. Marquis’ brother Adam serves as vice president of the two companies.
Pacifica’s 14% revenue growth last year sets a high bar, and the plan is to continue the strong growth by offering up its management services to other hotel operators.
The company currently has two third-party management contracts, both at properties it sold.
This year is the first time it’s focused on growing that segment of the business.
“Brand Experience”
The company’s experience with boutiques and brands should work in its favor, Matt Marquis said.
“We have a lot of brand experience,” he said. “We believe we can do all types of hotels and apply our management strategy.”
They’ll likely stick to the western U.S., with a particular focus in their home state.
“We’re very opportunistic,” he said. “I think we have found the greatest success in California, and I think that’s where our primary focus is opportunistically.”
Going outside the U.S. and partnering with a foreign investor or operator is more of a medium- to long-term possibility with nothing currently being considered, Marquis said.
The plan is to stay near the coast in any case.
“Coastal is a fairly small niche when it comes to hospitality and a very desirable niche, so it makes it very competitive in trying to acquire these assets,” Marquis said.
Financing is easier than it has been in the past, he said, and investors are “salivating for California coastal hotels.”
Spending on future acquisitions will vary. For example, historically the company has spent as little as a couple of million dollars for a 30-room hotel in Cambria to $75 million for a 450-room property in Hawaii, Marquis said.
Pacifica is currently working on a deal to buy a 100-bed hostel in downtown Santa Barbara that, if purchased, would be redeveloped into a high-end hostel.
Marquis thinks the investments the company is making this year should bear out amid an overall growth trend for the industry (see related stories, page 1).
“Last year was a phenomenal year for growth in the hotel industry, and we anticipate strong growth this year,” Marquis said. “We expect the hotel industry to probably be a 5% increase, and I think we’re very optimistic about our ability to perform above the market, no matter what the market’s doing.”
