Charlestowne Hotels Takes Organic Approach to Portfolio Growth

Amidst an acceleration of management company mergers & acquisitions, Charlestowne Hotels is taking a different approach to corporate growth. CEO Kyle Hughey shares his thoughts on this trend and what sets Charlestowne apart in CoStar’s latest story.

South Carolina-Based Third-Party Management Company Grew Portfolio by 20% in 2021

ATLANTA — Merger and acquisition activity has been accelerating in the past year among larger third-party companies looking to grow. South Carolina-based Charlestowne Hotels, however, is taking a different approach to growth, according to CEO Kyle Hughey.

Activity within the merger and acquisition space isn’t expected to slow down, Hughey said during a video interview at the recent Hunter Hotel Investment Conference.

“I’ve heard, ‘Everybody’s got a billion dollars to spend and they need to place it somewhere,'” he said. “That’s really good for larger management companies that want to continue to grow, grow, grow, but from a Charlestowne Hotels standpoint, we just don’t feel that’s where we fit.”

Kyle Hughey is CEO of Charlestowne Hotels.

Hughey feels confident that his company’s size and portfolio are in a spot where it can service its clients really well.

That’s not to say the 40-year-old company isn’t growing, however. The company expanded its portfolio in 2021 by 20%, largely through new development and new management contracts.

Charlestowne currently has 55 hotels in its portfolio and another six in development. Those under development are a mix of soft brands and independent, Hughey said.

“We entered [2020] and some of our owners were in the development phase so they continued their course, they didn’t back off. And those actualized in 2021. We opened four new properties, and additionally coming out of 2020, there were some owner-operators who said, ‘We need to make a change,’ and we took over six properties in 2021,” he said.

New hotel openings in 2021 included The Loutrel in Charleston, South Carolina, and Hotel Morgan in Morgantown, West Virginia.

Hughey said his company’s growth strategy has never been about solicitation or going hard after specific properties.

“We want our growth to be organic,” he said. “Though that pipeline doesn’t always feel so robust, those [relationships with potential owners] actualize a lot with us and we hope that continues.”

Marketing Strategies

Charlestowne Hotels has always had its marketing services in-house, said Chief Marketing Officer Michael Cady.

The third-party management company built a more robust in-house marketing team, which has been especially beneficial during the pandemic as rules and policies constantly change, he said. The in-house team includes creative designers, project managers, account managers and email marketers.

“By having an internal team, we were able to make changes by the minute. It allows for less layers, less bureaucracy, less time,” Cady said. “Staying as nimble and agile as that has made us stand out.”

Charlestowne also made the decision to not cut any positions within the marketing team. Each staff member kept full-time status and their salaries.

“It was a risk, but it sure worked out for us,” he added. “When all of these new developments opened, we were ready. Where some hotel management companies are so behind now is they’re trying to find people and build their teams back up. They can’t find anybody.”

Michael Cady is chief marketing officer at Charlestowne Hotels.

Cady said he set a goal to not increase marketing spending for this year but instead reallocate dollars into the right area based on analytics and learnings.

For example, instead of putting money toward tracking return on ad spending, his team redistributed those dollars to social media prospecting and awareness.

“We are trying to do things that make sense to attract more people instead of spending more on all channels,” he added.

Cady said customer reviews and a robust customer relationship management system are among the most important metrics and tools.

“If you have a robust CRM system, you can truly understand patterns of people and trends of people, which then allows you to send messages at the right time to the right people,” he said.

If a marketing department doesn’t have a data warehouse or CRM, “then you’re behind,” he added.

Cady said Charlestowne’s integrated marketing department, which handles branding, photography, online content distribution and paid media, has also created cost savings for owners, as opposed to them having third-party agency contracts. Owners save between 50% and 75% overall in resources, he said.

“When you’re dealing with [third-party marketing agencies] it’s going to take a lot longer and it’s going to cost a lot more money,” he added.

2022 Goals

Hughey said each year he picks a word for his goals to center on. This year it’s “refinement.”

He said Charlestowne’s marketing, revenue management, accounting and operations teams have all evolved in the past year. Now it’s about dialing in on what will make all teams the most efficient.

Cady’s word of the year is “longevity.”

“We don’t want to be a huge, mass company with hundreds of hotels. We can’t do what we do [at that size], so we want to create longevity with our current owners and then we want to be selective on our owners moving forward,” he said.

It’s also about creating happiness, he added.

“We want everyone to feel good and feel prideful. We want to get back to the emotional basics where I think during the pandemic it was a little tricky,” he said.