Visit the offices of MeriStar Hotels & Resorts in the nation's capital, and one will encounter an efficient, enthusiastic and energetic group of people that supply the base of support for the operations at one of the U.S. hotel industry's most growth-oriented and successful companies. 

Nestled in Georgetown inside a building that was designed to accommodate the hilly terrain, MeriStar (formerly known as CapStar Hotel Co.) is now established as the trailblazer in the financial structure known as a paper-clip real-estate investment trust. 

Step inside the office of Paul Whetsell, company chairman, and behind his desk is an almost - panoramic view of the Potomac River. Drapes open wide and with his back to the window, Whetsell forgoes the boating fun taking place within shouting distance behind him to instead skipper an organization with a $3 billion market cap, more than 200 owned and/or operated hotels and an organizational philosophy that says the paper-clip arrangement, and the resulting strong alignment of ownership and management, provides the most efficient and profitable means of owning and operating hotels. 

The structure came together when CapStar merged in late winter with American General Hospitality, a Dallas-based owner/operator of hotels,which resulted in the formation of MeriStar, a C-Corp. The deal meant CapStar spun off its operations and management business as MeriStar Hotels & Resorts, and then merged CapStar into AGH to operate as a REIT called MeriStar Hospitality Corp. Whetsell has long been a guy who stressed operations, and the good cheer in the other offices at company headquarters, gets its energy from the person at the top. 

When Whetsell was studying at Davidson College in North Carolina, he became interested in the hospitality industry through a hotel job at which he worked 48 hours a week. Following graduation, Whetsell wanted to work in the U.S. State Department, but another industry was drawing him closer. It was 1973, and Quality Inns (now Choice Hotels) hired the new grad to work in the franchise 
division as a quality checker, and with some other responsibilities in franchisee relations. 

"I had considered law as a career, but [I soon learned that] I liked all aspects of the hotel industry," Whetsell said. By 1979 at the age of 29, Whetsell had become a v.p. of the Quality franchise division, but he moved to hotel veteran Joe McCarthy's Lincoln Hotels as vice president of development. 

Whetsell wanted to own a company that owned and operated hotels, and so he formed CapStar in 1987, embarking on a role in which he would better be able to further his view that the best way to run a hotel was through an alignment of ownership and management. 

"Many hotels were facing problems because the owner had different objectives than did the operator," Whetsell said. "Then there are owners who try to manage the property themselves, but are not good operators." 

Whetsell likes both aspects of the industry, but stresses the importance of good operations. "It doesn't take a lot of brains to buy a hotel when you have the money," he said. "People who don't see it as an operations' business will be in trouble." Whetsell described as bunk the notion that an operator without ownership concerns is better at managing a hotel, because he or she can run the property without profit-and-loss worries. 

"The important thing for the owner and operator is to understand each other's objectives," Whetsell said. "The operator must be clear on what the owner wants to accomplish with the asset and work with the owner toward that goal." At MeriStar, the principal operating objectives are to generate higher RevPAR and to increase net operating income while providing guests with high-quality service and value. Whetsell said he creates and executes management plans specifically tailored for each hotel, rather than implementing operating strategies designed to maintain a uniform corporate image or brand. 

"Custom-tailored business plans are the most-effective means of addressing the needs of a given hotel or market," he said. "Skilled management of hotel operations is the most critical element in maximizing revenue and cashflow in full-service hotels." 

Whetsell said there is an inherent advantage in working with several different brands and having first-hand knowledge of what works best where, because it increases his company's ability to give a particular market what it needs. For that and other reasons, Whetsell said he would not be inclined to start his own brand, but that he might be interested in buying others. 

"Most of the properties I operate, I'm willing to put money into. I like the ownership side," he said. "But I'm not interested in buying or managing every hotel in the world. If I can't give 100 percent to the owner, I won't do it." Whetsell said a major advantage in operating many hotels is that it gives him the chance to build different operational systems and provide career opportunities for his employees.
 
Now that Whetsell is in charge of the nation's third-largest hotel REIT and its second-largest independent hotel management company, he plans to grow externally through acquisitions and internally by working to improve the operating results of the owned and managed hotels. 

"The REIT will focus on acquiring undervalued first-class, full-service hotels in major metropolitan areas where the barriers to new competition are highest," Whetsell said. "The new operating company will also focus on external growth by obtaining management contracts from the REIT, as well as from third-party owners." 

Whetsell has accepted that the global hotel industry is going to keep consolidating, and he said the deal with AGH puts MeriStar in position to be one of the consolidators. 

"There will still be a lot of small-cap and mid-cap companies that can take a hotel and run it as well as any management company, but they can't provide all the benefits without size," Whetsell said. "We're still going to have 200 management companies, but the small will be smaller." 

Relative to the increase in supply currently taking place, Whetsell said he is frustrated by hotel companies that build new properties where it is easy to do so, as opposed to building where they are needed. 

"It's not a problem everywhere, but it will be in certain markets," he said. Whetsell's company is now the largest independent owner of Hiltons, Sheratons and Westins. 

"This multibrand strategy gives us a significant advantage in sourcing acquisition candidates," he said. "CapStar and American General already enjoyed solid relationships with all of the major, upscale premium-branded franchise companies. These companies know that our strong operations will enhance their brands." 

Whetsell predicted the tax savings resulting from CapStar's merger into the REIT will result in operating cost savings of up to $10 million in the first year of operation. That's in addition to the cost savings in purchasing, insurance and related activities. 

Not satisfied with operating only commercial hotels, Whetsell is now taking his company into the resort business, another area in which he is convinced his team can do well. 

"It's a really different area, operating a resort," he said. "With commercial hotels, guests want a fast check-in and check-out and good foodservice, but they're gone the rest of the day. With a resort, it's a 24-hours-a-day [effort]." 

In mid-April, Whetsell agreed to purchase South Seas Properties Co., which is western Florida's largest beachfront resort operator and owner. "We wanted to broaden our base," he said. "We see acquisition and internal growth opportunities in the highly fragmented resort segment and this acquisition is on- target with that goal." 

Resorts, major metropolitan hotels and a vast array of brands across the midmarket and upscale spectrum is the MeriStar of the future-a future Whetsell started dreaming about at an age when many other hotel executives had been pursuing their dream for almost a decade. Whetsell is sure he has found the formula for success. 

"The fundamentals for the hotel industry, especially for first-class, full- service hotels, remain positive," Whetsell said. As positive as the attitude among MeriStar employees and their leader.