That big hotel on the hill can be a tourist town’s best friend. And so it’s been with the Algonquin Hotel in St. Andrews by-the-Sea. When the Fairmont chain pulled out last fall, a pall fell over the community. What would become of the town if its hotel failed to open?
This concern, of course, is predicated on whether you think tourism is a sustainable industry, which in a fossil fuel-scarce future it may not be. But for now tourism keeps many economies vibrant, from Jaipur to Jamaica*. Even so, depending on tourism as the only source of income makes for a fragile economy.
Fortunately for the tiny seaside community where I live, someone, make that several someones seem to be ready to rescue our grand old hotel. With a letter of intent in the hands of the current owner (the Province of New Brunswick), the potential new owners are Southwest Properties, New Castle Hotels & Resorts and the famous Marriott hotel chain. And we’ll know in 45 days whether the deal will move ahead.
What about the companies? The Marriott is easy; it’s a world-class brand. And coincidentally, the Marriott already brands a very famous Algonquin Hotel in the heart of Manhattan. I wrote “brands” rather than “owns”, because the Marriott chain, like many other large hotel chains, doesn’t own properties.
The actual owner of that other Algonquin is HEI Hotels & Resorts, a company based in Norwalk, Connecticut, which owns and operates over 30 luxury hotels for brands such as Hilton, Sheraton, Westin, Embassy Suites, and yes, Marriott. Did I just write that HEI “operates” these properties? Yes.
So what does the Marriott do? It manages the marketing and branding standards for hotels. The actual ownership and operating of the properties is done by companies such as HEI and others.
Two of these others are Southwest Properties and New Castle. Southwest is based in Halifax. New Castle is based in Shelton, Connecticut, coincidentally just 30 kilometers away from HEI’s headquarters. Together Southwest and New Castle have already built and now operate the Marriott hotel in Moncton, so they have a running start at hotel development in the province.
From what I can gather New Castle is the operations outfit, the one that hires staff and manages the day-to-day operations. Southwest is the property development company, the one that handles the renovations and maintenance of the physical plant.
If this seems to be a rather complicated business arrangement, it is. But there are benefits, at least to the companies. First, the hotel can be sold to new owners without affecting the main brand, in this case the Marriott. Second, each company can specialize and grow in its own area of expertise without having to invest in other, unrelated aspects of growth. Third, all companies can share the profits and reduce the liabilities by distributing the risks and responsibilities. Lawsuits, for example, might be more difficult with three companies involved rather than just one. Finally, the companies each have less exposure to the vagaries of local environments such as politics or public opinion.
Is this a good thing? On the local front I’d have to say that this seems to be a wonderful development for St. Andrews and its economy. With a renewed hotel and the power of the Marriott brand marketing it, the town’s tourism should be on an upswing. That means more visitors, more new businesses and a brighter local real estate market for years to come, barring an economic downturn.
There might even be some new development opportunities around the old hotel, a new indoor pool perhaps, or a portion of the hotel converted to condos, or even a waterfront townhouse development on the golf course. Time will tell.
But it’s the complexity thing that gives me pause. Not for the Algonquin development, but for the slightly disturbing notion of complexity as a growing feature of modern organizations. As it happens I just encountered a thinker exploring just such a thing. His name is Joseph Tainter, the author of The Collapse of Complex Societies written way back in 1988.
Tainter, an anthropologist and historian, theorizes that societies solve problems by developing complex solutions. As societies themselves become complex, they use more resources and energy to less effect, and reap diminishing returns. As everything becomes evermore complicated resources eventually become depleted, systems stagnate, decision-making becomes more cumbersome and even innovation slows to a trickle. Sound familiar?
Finally complex societies are faced with only three choices: a) successfully create even more complicated solutions, b) simplify or c) collapse. Of the three Tainter believes simplifying is the most difficult but ultimately the most successful approach.
I don’t exactly know how our old hotel on the hill could simplify its operations. The days of single individuals buying and operating hotels seem to be long gone. It will either collapse as a business or operate under a more complex system, hopefully successfully.
Today this is the best Valentine gift this town or this region is likely to get.
*Jamaica, almost entirely dependent on tourism for its economic health, has enduring poverty and one of the highest homicide rates in the world.