The Remington Difference: Why Smart Growth Beats Rapid Scaling - Sloan Dean, Remington Hospitality

Josiah: It looks like you're having fun. You have a big smile on your face. How are you feeling today?

Sloan: I feel great. You know, if you're not having fun, what the hell are we doing? We work in an industry where the doors don't close 24-7, 365. So if you don't love it, Don't sign up for it. But yeah, we're having a great time at Remington. Obviously, there's always more work than hours in the day. But who doesn't want to work in the travel business? I mean, when you think travel, that's where everybody else who works in the industry, what they do with their vacation. So we work in the places that other people go vacation. And so that's never lost on me. I have an engineering and a finance degree. And I took a job at IHG instead of Home Depot because I thought it sounded like more fun. And that was 20 years ago. And so if I forget about that, then why the hell didn't I go work at Home Depot? I love it.

Josiah: I want to go back to the basics alone, if we could, I want to talk about specifically, you know, travels, great hospitality within travels. Exciting. I am really passionate about kind of operations. I feel like operations is where the rubber hits the road. That's where the magic happens. That's where you delight guests. And on the financial side, that's also depending on how you're running a place. That's where you're making money, too. And it seems so important. I want to hear you talk a little bit about why you work and lead a hotel management company, hospitality management company. What is it about hotel management and operations that gets you excited?

Sloan: Well, I'm a double extrovert. So when I do Myers-Briggs, I'm an ENTJ and I am 99th percentile E. And so I think you can be an extrovert, you can be an introvert, you can be any type and be successful as a CEO. But I think what really draws me to hospitality and operations in particular is the people part. I have worked for private equity, I've worked for REITs, I've worked for brands, and now I run a really large operating company. And I love operations too because that's where guests and associates interact. And that's where the magic happens. It's all about people. And I always get questions about, well, what's AI going to do? We are a physical business where humans like to interact with other humans. Even introverts want to go to the bar and have a nice interaction with the bartender. And that's not going to change. Now it is changing because of technology and the labor force and some other things, but the core of it is, is people going to new places, whether that's for leisure or business and having nice experiences and staying in other locations away from their homes. And that is a people business. And that is what I love. I love interacting with housekeeping. I mean, it is a hard job turning 12, 14 rooms a day. I love being at the property and the energy that you get and the hustle and bustle. I'm one of these weirdos that I'm sitting in an Admirals Club in an airport and I don't mind it, even though air travel seems like getting on a Greyhound bus these days. So I think some of it's just innate in your blood and me being super extroverted is just a natural thing. I am a very social person and I think for very social people that you're drawn to this business. It's fun. And like I said, we work in buildings where other people go to vacation. How can you not be excited about that?

Josiah: I love it. I feel like watching you on some of the things you share on LinkedIn Sloan, I feel like even through the holidays, you're spending time with the teams. I see photos of you across the country, different parts of the world. It's clear that you care a lot about the people that you serve. Now, I'm trying to think of a more sophisticated way to ask this, but I want to hear you talk a little bit about the special sauce of Remington or the vibe or whatever you want to call it. I feel like there has been and is momentum around kind of what you've created at Remington Hospitality. We've talked about that over the years in a few conversations I can link to in the show notes, but I'm just thinking now, everything from how you have thought about making it a great place to work, where people can thrive, to how you think about technology, partnerships, but I'd love to hear you riff a little bit on this notion of like, how do you create a great vibe that is attractive to others within Remington?

Sloan: So if I step back, the foundation that a lot of people don't talk about that make great companies is the capital structure and the growth expectations that they set. So if I look at all the top 10 third party operating companies, Remington is one of them. Us and Highgate are the only operating platform that is not owned by private equity. Then Remington is the only operating platform that has no leverage. We have no debt. And so what does that afford us to do? It means that our board, that I report up through, wants to see 10 to 20 percent EBITDA growth a year, not 40 or 50, not putting debt on a platform and every deal is a good deal. And so I always say strategy is about sacrifice. So many companies in the hospitality space try to do too many things. You can't be good at economy, be good at luxury lifestyle, be great in food and beverage, be great at running internet. You're not good at anything. And so it really is true in business that the master of many is the master of none, but it starts with How are you structured as a company then affords you to make decisions over a more mid and long-term perspective. And so I think one of the best things I've done as a CEO is to not do bad deals. We've had the opportunity to acquire multiple competitors. We didn't do it because it was bad cultural alignment or it was bad structure of the contracts. And I think it is that smart, very conscientious growth that you often see in like the C-Corp brands, but you often don't see in third-party hotel management because of the capital structure of third-party hotel management is either high net worth individuals or private equity owner. And so they just want to grow as fast as possible, sell it, get out. And here we just want really smart growth over a long period of time. And so I start with that because that having that capital structure not being levered, being very intentional about what we do, then bleeds into the organization. And then I can, when I hire a new officer, I just hired a new chief accounting officer, I can look in their face and say, we will be here in a decade. And when I say where the passionate people thrive, I don't mean thrive next quarter or next year. I mean, over multiple years, it's taking a longer position on things.

Josiah: Sloan, let me ask you about this because I talked to so many people across the industry. I hear scale, scale, scale. Things are better if you scale. That feels like growth, growth, growth. Everyone wants growth. I was reading this book, Same as Ever by Morgan Housel this week, and it's interesting. He had this kind of notion of the optimal size for performance, right? A flea can jump two feet. A human can jump four feet. And there is this kind of like perfect size, given all the factors out there, that helps you perform at your best. How do you think about that as a leader of Remington? What's the optimal size for Remington?

Sloan: Well, I think in our current operating capacity and how we operate, I think it's somewhere between 100 and 150 hotels to 250. Now, I think what no one has gotten right, that there is a way to scale a business in the right way and get bigger than that. But you have to do it through technology. You have to do it through career planning. You have to do it through long-term contracts. Because what happens is most companies have really talented founders or CEOs. Then, they hire a few more talented folks. And the success of those companies are predicated on the ability of those individuals. I have 10,000 employees. We are a large staffing company. And for every incremental person I hire, it gets further away from me, from the officers. And so some of that culture and some of that talent gets diluted. And I think, you know, Ambridge, not to pick on me, it's the classic example. You had a very charismatic founder in Dave Johnson and they grew through debt and M&A and grew really fast. And we just saw today that the lenders are taking over, which is basically a structure bankruptcy or restructuring, if you will. And that is the classic example of growing too fast and getting away from that kind of core strength, which is what the founder and some of the folks. And so I think where third party companies struggle with scale is that the product gets diluted. And I think what I'm really trying to be curious about is can we have career pathing that has multiple Sloans embedded in the business, you know, like where you have up and comers. Can we use AI to make people more efficient? And so if I have a really talented revenue manager and they can only revenue manage one or two big full service hotels in the way, but can they do five tomorrow? Because we've automated the same in sales. You know, can we automate RFP responses? And so I think using technology to make things more scalable, I think in current form, people that say the scale is always better in third-party hotel management, it's a false pretense. Once you get to a hundred hotels, you have all the benefits of insurance, procurement, labor savings, and then when you've crossed basically three or four hundred hotels now, you lose all the benefits of owner-centric, every hotel matters, individual owner relations, and you just get too big and you fall in on yourself, and no one has fixed You know, everybody, it's easy to get to the hundred, you know, you just scale up. No one is fixed. Once you cross that 400, how you maintain that level of quality. And that's something I'm really focused on as we grow is like once we get there and we get to two or two 50, doing it in a way where every single owner is satisfied, every hotel is performing well. And you can only do that if you have a different mentality around talent and a different mentality around technology adoption. And I don't know if anybody's cracked that yet.

Josiah: Let's dive into that a bit further. You mentioned that you can only be really great at a couple of things. And I am thinking back to a conversation we had earlier about early on in your role, even though you have deep financial commercial expertise, you made big investments into the employer brand and what the people experience was like. And I think you're probably still reaping the benefits of that. I'm curious how you think about this today. How do you decide, A, what to focus on? And I think you may have just kind of answered my question here about some of the core capabilities, but where are some of the core focus areas for you right now?

Sloan: First off, I think we're very focused on how we become more efficient with labor in general. You know, if I look at my 10,000 associates, 7,000 are hourly and or contract labor. Labor is still the biggest variable expense at each individual's hotel, and wage has grown 40 to 45% since COVID. And it's not that I want to be replacing jobs. I don't think we're at a point where job replacement and hospitality are either customer-centric and what people want. And it's also the technology is not there, but how can I be more efficient? Meaning can I operate a hotel with 10 or 20% less staff and have fewer errors? And so I'm really focused on productivity, efficiency, holding on to the productivity gains we've gotten. I think also, I think a lot of people are now traveling with their stomach and they make a lot of hotel decisions, particularly in the lifestyle and boutique. A lot of hotels we operate because of the bar or restaurant at the hotel. And how can we have exceptional offerings? I think there are a few new brands, particularly in the luxury segment, that have done this really well. You know, we're almost dining at the hotel or hanging out at the hotel is cool again. You know, if you look at hotels in the 70s and 80s, they had really hustle bustle food and beverage operations. And I'd say the 90s, the 2000s, it was like all restaurants and hotels lose money. Let's just not have to be a loss leader. Let's cut down the breakfast offering. It was just an afterthought. And then the soft brands and lifestyle and some creativity led in the last decade, some real great offerings. And I think now people are, I can't tell you how many friends I've had who say, well, I stay at this hotel because the bar is super cool. Or I stay here because the restaurant's awesome and I can just walk downstairs and have a fun dinner. And so it's become a booking decision. in conjunction with location and price point. Used to it was location first, price second, brand third, and somewhere around fifth or sixth, food and beverage was a consideration. It's now top three in a lot of cases. We have a food and beverage team of four above property, have award-winning chefs, and we do $300 million in food and beverage alone. And so we're like a big restaurant company. And so I'm treating it as such that, you know, you need to have the talent. to have unique offerings. And it's bar heavy. We're drink heavy because that's where the profit is. And so I really focus on being a high innovator in food and beverage. So those are probably top of mind. There's a lot of other things. I think that we're too transactional with our workforce. Us, like many others, have become too reliant on contract labor because it was easy. You know, throw it over the fence to a contract labor company. Maybe you're paying 20 cents on the dollar more, but make it their problem. Be able to flex up and down. And the quality of service suffers. It is a little more expensive. And so we're working on training programs. You know, how do we bring somebody in as a, you know, banquet server? And they rise to general manager. And, you know, a few of the big chain scales have some good development programs, but, you know, it's not common in our space. We're a need space hiring company. How do we think more strategically about labor over a longer period of time? I call it hire to retire. A lot of you are thinking about hire retire today, right? The complaint about millennials is they jump around a lot. Well, maybe you're not offering them what they want. And so I'd love nothing more than to be like this. the contrarian hospitality company where the 22 year old comes and stays with us and is at 40 an officer. You know, we're working on that. We haven't solved it. So that's, that's some of the stuff that we're working on.