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The Big Chains Reaching Out to Blacks, Latinos to Franchise
 their Brands; Of  50,000 Hotels in the United States,
 Fewer than 100 are Majority Black Owned
By Leon Stafford, The Atlanta Journal-Constitution
Knight Ridder/Tribune Business News

Apr. 5, 2006 - After a tough three years of low occupancy and dwindling revenue, the hotel industry is bouncing back, and it's looking to black and Latino investors to help boost growth.

The big chains -- from Marriott to Hilton to Holiday Inn -- are reaching out to minorities to franchise their brands and bring more rooms to a town near you.

The reason is simple: Room demand is growing and the $114 billion hotel industry needs new blood to help pay for accommodations that are becoming increasingly expensive to build. Blacks and Latinos -- who make up less than 1 percent of franchise owners -- represent an untapped investment source, industry experts say.

It's an effort the industry hopes will someday duplicate the success hotels have had in wooing Asian franchisees -- specifically Indian-Americans. They now operate about half of the country's limited-service hotels, the type that offer rooms but don't have restaurants or room service.

"The banking institutions have never been as bullish on hotels as they are now," said Mike Roberts, a black multimillionaire businessman from St. Louis, who, with his brother Steve, is opening his fifth hotel later this year by converting a Garden Inn in Marietta into a Crowne Plaza.

Atlanta could be a focus of the movement to lure more African-Americans into the hotel business. Though the metro area is home to one of the wealthiest black populations in the country, industry leaders could only identify four majority black-owned hotels, including Roberts' Crowne Plaza.

And those hotels -- two in DeKalb County and two in Cobb -- have been black-owned for just two years.

"When we started researching this, we were quite surprised," said Andy Ingraham, president and chief executive officer of the Fort Lauderdale, Fla.-based National Association of Black Hotel Owners, Operators & Developers.

"Atlanta is known by outsiders as a mecca for people of color, so we expected better representation."

NABHOOD is bringing its national convention to Atlanta July 19-22. The conference, which will be held at the Atlanta Century Center Marriott -- a hotel owned by black billionaire Robert Johnson, founder of cable's Black Entertainment Television -- will spotlight the issue of black and Latino hotel ownership.

"Atlanta, quite frankly, has more potential," Ingraham said. "We hope that this conference in July is a beacon to hotel ownership."

Never too late Increasing black and Latino hotel ownership has been on the industry's radar for a long time, experts say, but the effort sped up after the NAACP in 1997 criticized lodging leaders for a lack of black hotel owners. Since then, the civil rights group has issued updated critiques of lodging giants' attempts to move African-Americans from behind the front desk to the owner's office.

"The NAACP had and continues to have an impact on having those companies do the right thing," Ingraham said.

Of the close to 50,000 hotels in the United States, fewer than 100 are majority black-owned, Ingraham said.

Industry experts say the Latino community franchises even fewer properties.

The small number of black-franchised hotels will get a little bigger sometime this spring when BET founder Johnson completes a deal to purchase 100 U.S. hotels, mostly Marriott locations, for $1.7 billion from White Lodging Services Corp. of Merrillville, Ind.

Toma Brashear, a former vice president for Days Inn and chairman of Naples, Fla.-based hotel consulting firm Hospitality Artists, said the industry needs to attract newcomers -- and quickly.

Hotels are needed in expanding areas along interstates, near business parks and in redeveloping city centers. The new demand has helped the industry enjoy 32 consecutive months of growth in room sales, he said.

Projections are for 7 percent growth this year and 6 percent in 2007, Brashear said. "The industry is in need of new blood to run new hotels."

Outside of the Indian community, minority ownership has grown slowly, most experts say, because most black and Latino investors do not know much about hotel ownership. And those who do often are discouraged by the high cost of the investment.

For instance, a 60-room, limited-service hotel -- such as a Red Roof Inn -- can cost up to $2 million, Brashear said.

That is a huge amount of capital for a single investor to pull together, said Samuel Leccima, who runs a private real estate fund. He is targeting deep-pocketed black investors in Atlanta like entertainers, doctors and business people for a plan he is putting together to buy a hotel.

"The response has ranged from horror about the cost of entry to excitement about the returns," he said. "It's an education process."

The learning curve is not limited to cost, said Connie Robinson, who is an investor in a different hotel deal.

After putting together the necessary financing to build a hotel, Robinson, who is black and has bought and sold three McDonald's franchises, has spent the last 18 months looking in Florida, Georgia and North Carolina for a location for her hotel.

The challenge, she said, is coming up with a spot that is near where lodgers need to be, like convention facilities, hospitals, airports or office parks. Finding available or affordable land in those areas is much harder than finding a spot for a fast-food restaurant, she said.

"It's a lot more difficult than you think," she said. "It has taken some time."

The biggest barrier, said InterContinental Hotels' Roslyn Dickerson, is access to the wheeler-dealers who make hotels happen after the big companies and investors have signed agreements.

"The challenge is access to developers, architects, real estate brokers," said Dickerson, regional senior vice president of diversity for InterContinental, whose brands include Holiday Inn, Crowne Plaza, Staybridge Suites and InterContinental Hotels. The London-based company has its American offices in Atlanta.

In the early '80s, Asian hotel ownership was about where black and Latino lodging investment is now, Brashear said.

Asian hotel operators started small, with tiny hotels they bought with capital that usually came from people in the community. As their business grew, they invested in larger properties until they became owners of many of the country's flagship brands.

Since then, access to money, through partnerships with the hotel chains and through traditional bank loans, has become more abundant, experts say.

"We're going to aggressively go after the greater Atlanta community," said Roberts, saying his company is considering other hotels in the city.

Even local entertainers are getting interested. Songwriter, producer and Grammy Award-winner Bryan-Michael Cox, who earned his chops in Atlanta working with Jermaine Dupri and writing for Mariah Carey and Destiny's Child, is investing with Leccima to buy a hotel, although they haven't settled on a location.

Cox, 28, who also is investing in tennis shoes, real estate and possibly fast-food franchises, said he spends so much time in hotels, he might as well own one.

"I'm a risk-taker. If a hotel is done right, it can be booked up every day and be profitable," he said. "I aspire to be the ultimate entrepreneur."

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To see more of The Atlanta Journal-Constitution, or to subscribe to the newspaper, go to http://www.ajc.com.

Copyright (c) 2006, The Atlanta Journal-Constitution

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