Ramesh Gokal is a 39-year veteran of the hospitality industry, with a recognized reputation in the areas of entrepreneurship, franchise leadership and mediation expertise. His diverse industry experience includes being an entrepreneur, owning developing and managing a diverse hotel portfolio, working as a brand president for the world’s largest hotel franchise company, Cendant, and selling commercial real estate as a licensed real estate broker in the southeast.
Mr. Gokal is certified as a mediator and listed on the franchising Panel of Neutrals of the International Institute for Conflict Prevention and Resolution. Most recently he currently served as the Senior Vice President, Lodging & Franchising, for Kapoor and Kapoor Hospitality Consultants, Inc. and provided expertise in corporate and association transformation through strategic planning and supportive governance. Mr. Gokal also owns Plan B Solutions, a company offering mediation services to the lodging and franchising industry. He currently serves as President of PeachState Hospitality, LLC, a rapidly growing hotel management company.
Resources & Links
- Email: rameshotel[at]aol.com
Mentioned in this episode
- PeachState Hospitality
- Asian American Hotel Owners Association (AAHOA)
- International Institute for Conflict Prevention and Resolution
- Tarun Kapoor
- Kapoor & Kapoor Hospitality Consultants
- Henry Silverman
- HP Rama
- Ravi Patel
In the News
- Asian Hospitality – PeachState Hospitality names new president
Let’s start out with you sharing a little bit about your background so listeners can get to know you.
Not many people know this, but I was actually born and grew up in South Africa during the Apartheid era, so those were kind of tough and, at the same time, interesting times. You know, when you’re young and when your children, you’re kinda impervious to what’s around you; You just make the best of what you’ve got. So, it was interesting times though, and what that created for me was, I had to leave South Africa to get higher education. So, I actually ended up in England where I did my senior high school and also went to college and I graduated as a mechanical engineer of all things.
I had a lifelong interest to be in the medical field, so after I left the mechanical engineering, I entered a Masters course in biomedical engineering. Those were very early days for biomedical engineering; only to colleges in England offered that course. In any case, sadly, I had to leave that course about three quarters of the way because my dad was not doing well and I had to go back to South Africa.
Having got my education, again the Apartheid era, it took me about nine months to find a job in South Africa as an engineer, albeit that there was a shortage of engineers in South Africa. But, I did enter the engineering field and, long story short, along the way I got married, started my own business in a tourism field and tried to establish a tour company for our nonwhites in South Africa. Unfortunately, I could not get licenses because I was not prepared to bribe the people that needed to be bribed. I’ve always felt that if you go down the wrong crossroads, it is very difficult, if not impossible, to come back to the straight road. So, I stayed away from that, and I decided I needed to move out of South Africa because that’s not where my future was. And, coincidentally, my brother asked me if I would come with him to America because he had little money saved up and he wanted to leave it here in case we had to flee from South Africa. So, I came here on the paid leave for my work, basically on my vacation, and never left the country.
My brother and I visited with a friend in California who said, “You know, you folks from overseas come here, you bring your money, put in the bank, and you go away and you never come back. Nobody in America leaves money in the bank that way. You invest it.”
‘Course, you know, being visitors, my brother and I said, “Well, yeah, we’ll think about that. That’s good advice, and we’ll come back.” And he said, “No, no, no. All of you say you come back, and you never come back. If you’re serious, you stay.” So, my brother looked at me and said, “You have a job. I have a business to run. Guess what, you’re staying.” And I did.
So that’s my story about how I got to America.
What year was that?
I actually had two daughters that were born in South Africa; one of them was only four weeks old at the time. And, I called my wife and said, “Guess what. We’re moving to America.” And so, she came over, and of course we got our paperwork in, and I was probably one of the last applicants under the old law that required you to invest $10,000 in the business and you could apply for a green card.
Okay, and that’s the year you started hospitality concepts then – in March 1976, right?
No, actually not. I had limited funds, and I was in California looking for a business, and everybody that I met kept saying the only business we go into the hotel business. So I started looking for hotels and motels in California, and I had around $30,000 – $35,000 and that didn’t buy anything in California. So, I started venturing out and I ended up in Charlotte, North Carolina, bought a 26 room mom-and-pop motel – the Charlotte Motor Inn. That’s what started me in the hotel business.
I met HP very early on at that the time. In fact, HP introduced me to the broker that sold me that motel.
HP Rama, Yes. And, over the years, I sold that motel and bought several others in sold them and, ultimately built a management company that was the Hospitality Concepts company. I also joined the broker in doing real estate sales, and for I can remember early days, about five years, I was in the car more than anywhere else. I drove about 100,000 miles a year showing motels and selling motels. Those are very early years for the East Coast. A lot of our buyers came from Chicago, New York, New Jersey. And so, I got to know a lot, a lot of hotel owners in those early days.
So, you started out buying your first – you said it was the Charlotte Motor Inn.
You had no experience when you made that first purchase, correct?
No, I did not.
How did you do it? How did you pull that off?
Well, my wife cried a lot. We bought a motel that was depressed, and we started cleaning it up, and I was cleaning bathrooms and cleaning rooms, along with my wife. We would leave our little two girls in our apartment watching TV while we cleaned rooms. I repaired everything that needed to be repaired. We actually had a switch board that I haven’t seen since; one of those plug-in switchboards. But, we learned. The most vivid memory is my room rate was $8.00, and I raised the rate to $8.25 and lost business.
Wow – rate sensitivity over one quarter. That’s crazy.
Well, you’ve been in the hospitality business for nearly 4 decades. And you’ve been everything, from the owner, developer, operator, franchise brand president, commercial real estate broker, and a hospitality consultant. And one of the things that I know you’re very good at is mediation, conflict prevention and resolution. Can you talk a little bit about the more common issues that arise in the franchisor/franchisee relationship, and what things hoteliers can do to see if they can mitigate these issues before they escalate?
Sure. Probably the most common occurrence is, of course, a quality assurance failure which is generally compounded by the lack of proper or adequate communication and communication early. A fair number of problems also start from not reading contracts and that’s not uncommon in the industry. Most people think those 2 or 300 page contracts are not with reading so they don’t read them. And, that gets compounded by relying on verbal understandings from their verbal communications with the sales personnel. And also, many people don’t hire specialized and competent legal counsel, so they rely on word-of-mouth and they sign contracts. And, probably what really compounds the problem, is when they do get into trouble, they ignore the earlier default notices for months on end, and those default notices being ignored eventually leads to a termination notice with demands for unpaid fees and liquidated damages, and usually that’s when most people start paying attention. And, to your point, mitigating the issue before it escalates is exactly the right approach, but unfortunately, most people do not take that approach.
I used to call my mediation business Plan B Solutions for exactly that reason. My advice generally to franchisees and hoteliers is Plan A is communicate all the time. Know the people at the franchise company, and be known through a high touch process. That way, you can deal with potential conflicts on a relationship basis. If you’ve build a relationship, people know you people know you by face, and they’re more likely to resolve issues with you. And that’s Plan A.
Plan B obviously was mediate. I’m a very, very strong believer in the mediation approach. Mediation generally is nonbinding. It allows a business solution to a business problem. It also tries to repair and maintain the relationship. And, most importantly, it’s relatively inexpensive. I am befuddled why more people don’t use mediation to resolve issues
Why do you think that is, though? Do you think it’s just that they don’t understand that mediation can produce good results?
I think there is an inherent misunderstanding of the process which leads to fear and mistrust. A lot of franchisors, in fact, while I was at Cendant, we instituted mediation as they first resolution method in most of our contracts – certainly at Knights Inn. I got our legal department to insert that. And, just because it’s in there, and because a franchisor is willing to mediate, there somehow seems this misunderstanding that it must be to the benefit of the franchisor.
Got it. Do you need representation at all during a mediation?
Typically not. There are professional mediators, certified mediators. There is the CPR Institute – the International Center for Conflict Prevention and Resolution. It’s called CPR Insured, which is kind of funny, but appropriate. CPR has a panel of neutrals who are certified mediators on the list. And, you know, the franchisor can select a mediator, or franchisee can select a mediator. Typically, it’s one mediator that both parties agree to allow to mediate the resolution.
What’s interesting, you know and I refer this to most of our Indian compatriots; Asian American compatriots. A lot of them came from India from the villages, and in India, they used to have what they called a Panchayat – which was usually community elders of five people. And most people, if they had any kind of issues, from family issues to business issues, whatever, they generally relied on that Panchayat to provide resolution. Well, mediation is very similar to that, and it’s kinda interesting that it just hasn’t caught on in our community.
Yeah, and I think you kinda nailed it though when you’re talking about the fear. I think the fear, or maybe the misinformation, that keeps people from taking that action. And, going back to what you were talking about – that earlier communication. You know, I think people ge t those notices, they know that they’re struggling in a certain area, and they get that early default notice, and they ignore it hoping the problem will go away. And so now they’re compounding the issue. And that gets to the point where it starts to become more of a hostile, adversarial exchange, rather than maybe a collaborative effort to try to resolve a problem.
Right, and in particular, by the time it gets to the point that you’re talking about, you have to have legal representation so your communication ability is changed from lawyer to lawyer as opposed to you being able to directly talk to the people involved.
Yeah, I don’t want to beat a dead horse here, but if you could just break it down into a couple of steps here, for your Plan A, if you will? What I heard you say, the first thing is to have regular communication; to know and be known by the franchisor, so it’s a high touch interaction with them, so it’s more of a personal relationship. Is that accurate?
That’s absolutely correct, yes.
Okay, and so then the next thing I heard was, when things go bad, and things do – maybe your occupancies are down, your revenues are down, you can afford to do some of the upgrades that you need to do, and see you start falling behind, and you start getting some of these default notices – to communicate immediately. Don’t ignore them. Take them very seriously, and then have a very open and transparent discussion with them. Is that correct?
That’s correct. Seek a resolution. If you know people personally, they will listen to your problems, and will work to resolve amicably. I have done that all my life. I have dealt with franchisors for many of my years in the hotel business, and I was able to leave franchises without paying liquidated damages, I was able to work out financial relief, I was able to work out financing on our past due fees, all of this mainly because I felt like I kept a relationship with the people I was dealing with.
Got it. Okay, and so when he gets to the point, though, where the negotiation alone is not getting you where you need to go, then the next thing that you might recommend would be to consider the mediation, right?
Absolutely. You know, mediation allows you one more opportunity to have a communication. And typically, as a mediator, I can tell you that part of our training is both parties need to understand going in, that it’s not a win-lose discussion. As a mediator, I like to say to win-win, but the fact of the matter is both parties are going to leave something behind. So, to a certain extent, both parties lose something, but you are able to preserve a relationship, and you’re also able to resolve the issues at hand. And sometimes they don’t always go your way, or they don’t go the way the franchisor wants, but I don’t think any franchisor necessarily relishes being in court over issues; it’s distracting, it’s not the normal business, and that’s not what they want to do, as much as franchisees sometime mistake that as being the way franchises operate.
[spp-tweet tweet=”‘Mediation allows you one more opportunity to have a communication.’ ~Ramesh Gokal”]
And, you said it’s nonbinding in most cases, so there’s really not much of a downside if they try the mediation process, and they’re just really not happy with where that went, then they can take it to court if they have to. Is that correct?
That’s correct. You know, I tell people there are three ways to make a decision. One is, you make it yourself, the other is someone else makes it for you, and the third, which is the worst, time makes it for you. And, what we just went through, it basically describes that. Mediation allows you to make your own decisions. Once you go to arbitration, you go to litigation; other people making decisions for you, and those are never desirable, not to mention costly.
And as a side issue, I will say this that, I think AAHOA probably has involved itself either through Fred or one of the associates at AAHOA , in I don’t know hundreds of the mediations, albeit informally, but you know, it’s been done through AAHOA.
Yeah, I know that AAHOA did that a lot. You know, someone’s facing enormous liquidated damages, and a phone call from Fred would open a dialogue where you the relationship it really soured, it’s very adversarial, and you know just a 20 minute conversation or something would start that dialogue and usually it becomes a win-win at the end of the day. So yeah, the association has been wonderful in that regard.
While we are talking about AAHOA, you’ve been an AAHOA member since it started back in 1989, and as I said earlier, you’ve been you are very much involved in the strategic planning process, which was not a short one – it took I think 10 years start to finish. So, why are you so big on service?
You know, I’m like all Americans – I believe giving back to the country, to our community is so important because we’ve got so much. I think sometimes people, particularly people that are born in this country, do not appreciate how much this country gives to us, and not just freedom, but the opportunities; they’re tremendous. And, like all Americans, I’ve learned that we have to give back. So, that’s my basis for service. But I will tell you that, as it relates to AAHOA, I think my service pales to what a lot of people have given. I’m absolutely amazed the level of commitment that past chairman of given, and even board members and committee members. The time, the energy, the money, the talent that they’ve sacrificed. Hundreds of people have done that, and I’m really amazed about that, and I think you working in AAHOA so that, too.
Oh yes, absolutely.
The biggest thing that I’d like to say about that is that we forget the unrecognized heroes in that process, and my family is included in that. We forget how much sacrifice the family members are making allowing us guys to, and sometimes girls, to do these things that seem sometimes silly to other people, but you know, it’s a whole family commitment. I couldn’t have done what I’ve done without my family support.
Absolutely. Yeah, the sacrifice – I mean, especially when some gets to the Officer level with AAHOA. That’s a 4-5 year commitment, and many of them serve for years before that. And, you know, if we have 20 regional meetings a year, plus an annual convention, plus a half a dozen board meetings, I mean, they’re on the road for the Association constantly. And that’s not just the only way that they’re giving, either. Their giving on conference calls, and their attending other brand conferences and other industry events. And, I’m glad you recognize that, too, because it the whole family is sacrificing.
Let’s talk about leadership. You’ve been in leadership roles most of your career. What are some of the steps that you took to create that?
Jonathan, I’m not sure that I consciously took any particular steps. On the other hand I’ve always held the view that you stay true to your values and good things will happen.
My family values that I pushed to my children are four in number. First one is respect everyone and everything. I insist that we respect every human being in everything we touch or interact with. My second value is inspire excellence in every interaction. My third value is be intellectually honest, and I say intellectually honest, because we can talk about honesty and, you know, people talk about white lies and black lies or whatever, but being intellectually honest is very important to me, and you have to embrace integrity. My fourth value, which is really my favorite, is never miss an opportunity to be someone’s Angel. I believe that God’s angels are right here, people on earth, and so we all have an opportunity from time to time to be someone’s Angel, and missing that opportunity is missing a big part of living.
[spp-tweet tweet=”‘Never miss an opportunity to be someone’s Angel.’ ~Ramesh Gokal”]
That’s great. Can you give me an example of an opportunity that you had to be someone’s Angel, or does that defeat the purpose to talk about it?
Yes, it does. I could tell you about some people that were my angels. In particular, a gentlemen that I’ve lost touch with, sadly, but he was a banker, he was a good friend. His name was John Paradise, and I recall one day I had a note due the next day of $150,000 and I was scratching my head about where I was going to get my $150,000. I called my friends, I called my family, and I was slowly starting to get $10,000 here, and $20,000 here, and John called me around 5 o’clock, as he often called me, and said, “Ramesh, feel like going out for a drink?” And I said, “Nah John, I don’t think so.” And the amazing thing was, he sensed some sadness in just me saying that, and he said “What’s wrong?” So I told him, and he said, “Give me ten minutes.” He went to his boss and said, “If we’re ever going to lend somebody some money, this is the man, and I’ll stand behind him.” He called me back ten minutes later, he said “Come pick up the check.” That’s an angel.
Absolutely. Thank you for sharing that story, too because, you know, we all need that hand up sometime, right?
Yeah, and everybody does … everybody does, from time to time. My favorite saying on that is, the best exercise for the heart is to bend down and lift someone up.
That’s awesome, thank you. So, while we’re on leadership here, what you think makes an effective leader? Is it the tenets that you just shared there, respecting others, everyone and everything, inspiring excellence, you said, and being intellectually honest?
Yes. It still amazes me that we live in a world where I hear her TV newscasters, particularly in politics, explaining away things that, usually is, “Well, to keep his job, he asked to do this, or he has to do that.” And then I often wonder why we’re not intellectually honest about some of these things. But, I don’t want to get onto that house. I think, when you say effective leaders, that’s an interesting question because leaders are leaders but being an effective leader – maybe that’s somehow loaded.
My belief is leaders are everywhere. Families have leaders, whether it’s mom or dad or both. Brothers have leaders because one brother pushes harder than the others to direct him. Little League teams, football teams, baseball teams. So leadership is everywhere, and to me, the ultimate test probably is making the right decision and by that I mean, do the right thing, versus doing things right. And then, that often is that faces you. And, of course, you know clearly the great leaders had one thing in common beyond the basics of having a vision and being grounded and in touch with the people that they were leading etc. but the one thing that stands out to me with great leaders like Mandela or Gandhi or Martin Luther King is that they’re willing to sacrifice. And, you know, we all innately have leadership skills in us, but sometimes it takes adversity our challenges to bring those out from us. And, generally speaking, all leadership has a element of sacrifice in it.
[spp-tweet tweet=”‘Generally speaking, all leadership has a element of sacrifice in it.’ ~Ramesh Gokal”]
That’s an incredible answer, and incredible insight, and it’s not something I’ve heard yet – and I ask about effective leadership on just about every single episode. So thank you for sharing that. And I think you’re right; I think you nailed it, too.
So, what do you think some of the common pitfalls are that hoteliers face today, and what are some things they can do to avoid them?
In today’s world where hoteliers are so much more sophisticated than when we started. You know, back in ’76, you could get by running a motel if you didn’t even speak English because you kept a clean room and handed somebody a key and took the money and clean the room again the next day. Today, it’s just so much more sophisticated. Technology has played a big part in it, but also where playing at the level that none of us imagined. So, one of the things in today’s world that I see, and I find interesting, is that most people that I talked to, if they’re developing a new hotel or hotels, generally identify that hotel with the brand versus an asset. And, what I mean by that is you ask somebody, what are you building today, and they’ll say I’m building at Hampton or building a Marriott Courtyard or building a Marriott Fairfield, and to me, that almost seems shortsighted, as sophisticated as we are, because you’re really not building a Fairfield, you’re really not building a Hampton, you’re building an asset that you are going to own, or certainly finance for 25, 30 years. Your franchise that you put on it is a service you’re buying, no more than buying insurance or any other services, and that service could be five years, could be 10 years, could be 15 years. So, to identify an asset as I own a Hampton always seems shortsighted to me. It reminds me of like, I’m having kids, but around 16, they on my kids anymore. That, to me, is a pitfall I see. And, nothing against brands, nothing against franchisors, it’s just knowing the fact that you are the owner of the assets, and the franchisor is the service you’re buying.
And, that leads me to probably the second pitfall which, again, is fairly common and much more, I would say, in the Asian Indian community, is that we’re great asset managers – we build great hotels, we’re good at buying the best piece of land at the best price, getting the hotels built at the right price, etc. Sometimes we mistake that prowess as being good enough to run the hotel. And running hotels, operating hotels, is dramatically different from a developing hotel, and it takes a special mindset. And, a lot of companies don’t give it the attention it needs, and again, my point is that you bought or built a $30-$40 million asset – i’s like buying an airplane and then not having the right people to fly. So, the concentration on management is developing, but historically we’ve been – we haven’t paid as much attention to what I like to say again, is as it relates to operating hotels, is we’re in the people business. You’re really not in the hotel business, you’re in the people business – both as it relates to your associates, and as it relates to your guests. And, there is talent everywhere, but you have to find that talent; you have to give it the proper direction, give them the tools to get the job done, and then get out of the way. That seems to be a pitfall for many of us.
So let’s dig into that a little bit though. Would you say it’s an issue where they’re not hiring the right people, or that they’re not training the people effectively. Where’s the breakdown in the operation side?
I think it’s a little bit of all of it. It’s just the fact that we have to have a specific, separate mindset and structure to manage the hotels. I like to say flippantly that anybody can build a hotel – it takes a genius run one. Not quite genius, but it takes a lot of discipline – and it’s not the same discipline as developing a hotel, Developing a hotel is a 2-3 year project; it has a beginning and an end. You then have to operate that asset for the next 20, 25, however many years you plan to keep it, and you have to operate it well, and that’s a long term process, and it takes a different mindset, different structure, and a different understanding, and typically – Tarun Kapoor is a good friend of mine and I did a lot of consulting with Tarun, and the one thing we found again and again is the misunderstanding that just because I can develop a great hotel, I can also manage it well. It just takes a different personality. And in that, to your question is, all of it. You know, we’re dealing with people that are dynamic. People by nature are dynamic, and challenging, they’re constantly changing on you. But boy, if you get to work with people and give them the direction, give them the training, give them the environment where they can grow, boy, it’s such a rewarding experience when you get to the other side.
Yeah, I’ll bet. Let’s say we have a really honest listener right now. So, you know, the hotelier just built a great asset and they’re kind of knocking her head against the wall because, at the end of the day, they’re realizing that they’re not as effective as they need to be at operating that property. What would you recommend that they do to remedy that situation so they can get the hotel and tracked weight needs to be?
I often say, do not ignore the fact that you can hire competent management companies that specialize in doing this and there are plenty in this country. And, you know, we all know the business, Jonathan. It’s not like being a banker that just took over hotel and hands it over to a management company. If we, from time to time, looked at the good management companies, but we also know what our end goals are, we also know the business, so we know what to watch for. And, putting that in our negotiating structure with the management company, our expectations – from what kind of GSS scores we need, what kind of returns we need, what kind of employee benefits we need, to work on taking care of people and guests – all of these things we’re knowledgeable about. And, in a lot of ways, I feel like the 4%, well 3.5% – 5%, that you pay a management company, may be the biggest bargain you can buy for a 24/7 management of a hotel. That’s not to say I’m advocating everybody does it; I understand the emotional connection a lot of people have with the assets. And so, if they choose to manage them themselves, then they have to recognize that they need a management structure separate from the department structure.
That’s great advice, though, because that is a good option that people have available to them. You know, especially if they really feel like they’re driving the hotel into the ground; this enormous asset that they just invested in, but they realize they’re not getting anywhere, exploring a management company might be a good option.
And, you know, there are lots of examples of where people have given properties to a management company and failed. And, you really have to ask yourselves – did you really find a competent management company, number one. And, number two, did you lay out exactly what your expectations were, and not just hand over the hotel and hope at the end of the year something right will happen.
And also, if they could’ve not done the due diligence they they needed to before they built the asset. You know, it does come down to location, right, a lot of the times?
Not just locations. You know, in America today, we have 5 million hotel rooms. 5 million hotel rooms, to me, translates to one hotel room for every 60 living Americans. In contrast, I think there are about maybe 200,000 hotel rooms in India with a population of 1.5 Billion, so we’re in a very, very competitive environment. And, you’re exactly right – if you build the wrong product in the wrong place, no management company can pull you out of that.
So let’s talk about tips for profitability. You know, again, you’ve been on both sides of the fence here. Do you have any suggestions on ways hotels can improve their profitability?
Absolutely. One of the things I like to say, and I learned actually from somebody outside the industry, a good friend of mine. He said, “I don’t understand why you would not be the best compensator of your staff in a marketplace.” So the one thing I’ve learned is, you pay the best, and that way you hire the best, and then you delegate, and you demand the best. I see too often, were stuck in thinking I can control my costs to profitability. Controlling costs is clearly important, but in America, in the competitive world we live in, not bringing the revenues to the hotel could be the death of the hotel.
[spp-tweet tweet=”‘Be the best compensator of your staff in a marketplace.’ ~Ramesh Gokal”]
So investing in the right staff, you know, the sales staff for example – they can drive the revenues to the property. Even if you’re spending 10% more on a person’s salary, if they’re bringing in the revenues, than they’re worth every penny.
That’s right. If I have the best staff in any market, I expect them to deliver the best. I expect them to deliver better than any of my competitors, and on and on. You just want to be the best operator in the marketplace. And then, it’s not just about sales anymore. Sales are good, technology has taken a big chunk of that. But probably the most important factor is the relationship building with your customers at the hotel, and you can’t do that without great people on your staff.
Absolutely. Actually, that’s one of the things that I like to talk about, which is the lifetime value of a customer. You know, you hear people complain constantly about the OTA’s, for example, because they’re getting a chunk of that revenue when someone books at your property, but that’s fine. You know, the way I look at is that’s kind of your cost to obtain a customer. But, it’s your responsibility, once you have that person at your property, to give them an amazing experience and incentivize them, so they can become a direct customer in the future.
That’s absolutely right, Jonathan. And, you know, it’s not rocket science. Dealing with people, both our associates, and our guests, sometimes can be challenging, but if you’ve built relationships – and the relationships has to start with trust – you trust your guests and they trust you. So, when mistakes are made, and then they will be made, the trust factor allows us to rekindle that relationship and preserve that business.
Absolutely, I agree. Ramesh, when I reached out to you earlier this year for input on the business metrics software platform that I was building for hotel owners, you and I kind of dove into the importance of tracking business metrics in general. And, one of things I remember you stressed, was the importance of making a forecast, and then using your historical data as a guide to proactively plan the direction of the business. And I know that this is an area that you’ve consulted on, specifically with hotels, to help them really take their business to the next level. Can you talk a little bit about that?
Sure. A good friend of mine, and I’ve mentioned him before, and you know him – Tarun Kapoor and I did consulting work together. Something that Tarun reinforced what I subconsciously knew being an engineer, is fact-based decision-making. So much of business and life decisions are made on emotion and opinions that sometimes I wonder if our success is not purely accidental. I am constantly surprised at how many entrepreneurs in the hotel business think that the numbers are for reporting purposes and matrices, financial matrices in particular, are the accountant’s area. And I would say Tarun and I constantly drilled in our consulting business that smart decisions should always be made on real numbers and on facts. And so, having a daily view of your key numbers, whatever they are, key matrices; we used to call them the daily flash report, is absolutely critical. All decisions should be made based on real numbers. And that’s I think the conversation you and I had that because you are basically highlighting the fact that these are things, if you looked at every morning, may help you make better decisions.
[spp-tweet tweet=”‘All decisions should be made based on real numbers.’ ~Ramesh Gokal”]
Yeah, but it’s not just about the historical data – it’s also about making some projections so you can, for example, if you know that the month of September you did X amount in sales last year, you can do a forecast based on, you know, if there’s an activity in town or an event that’s coming to town, you can kinda forecast to find out where you expect to be, and then you want to measure that on a regular basis. So, if you’re down, what can you do differently? Maybe you need to lower your rate. Or, if you’re up, maybe you could capture a higher rate because you know the demand is higher. But I guess it all does come down to fact-based decision-making.
Yes, and I am a believer that, if you hire right, competent people, and give them the authority to do things right, you will succeed. So, one of the things I believe is, when I work with General Managers is, around September of the prior year, we get together, we create a marketing plan for each of our hotels, which then turns into a budget for the coming year, and that turns into a business plan for the coming year. And, that takes into consideration all of these things. All your forecasts are based on events that you’ve experienced, and the events that you know are coming into town next year, and the highs and lows of occupancies that you expect. And, you still obviously have to be on the ground and watch it week to week and day-to-day, what’s gonna happen. But, you start with a business plan, and then I leave my GMs alone. The only thing I want to know from them, day to day and week to week, is how are we tracking against the plan we put in place, if were down or up, and why?
Tell me about a defining moment in your career, really take a minute, take us there, and tells what felt like.
There’ve been so many, but probably the one I would remember I guess is when I was offered a job by John Snodgrass and Henry Silverman to go work for, at that time HFS Inc., to run Knights Inn. It’s interesting, at the time, I had 14 hotels I owned, I had a management company, I had a real estate company, and I was also involved with AAHOA, and that’s what led somewhat to this position. Ravi (Patel) and I would drive – those early years of AAHOA, we were driving everywhere on our own dime – and Ravi and I were driving to Atlanta for an AAHOA meeting, and just generally chatting, and I said to Ravi, “You know, I’m kinda bored. I have all this business but now it’s routine and it’s kinda boring, and boredom is something I have to face with myself because I know that I’ll get complacent.” So he said, “What would you do?” I said, “Well, I kind of feel like, being franchisees, we’re consistently following – so we’re in the following world. Wouldn’t it be nice for us to have a franchise where we could actually be on the leadership side?” And, it was just a conversation, but shortly after that, HFS was in the process of acquiring Knights Inn, and at the time, Ravi was chairman of the Economy Lodging Council at AH&LA. So John Snodgrass in his wisdom called Ravi and said, “Can you recommend somebody that might be a good fit for President for Knights Inn?” And Ravi said, “I know the perfect person, but you’ll never think of him. And, then he was right. I did most of my business in those years with HFS, I knew them and they knew me very well, but they just wouldn’t have thought; why would I leave a fairly robust ownership company and the management company and a real estate company to go work for somebody? But, Ravi is the one that initiated that, and John Snodgrass called me and said, “Would you really do this?” And I said, “Yes.”
So, what was that experience like – going from the owner, real estate broker, to running a brand?
Well, you know, talk about people allowing you to do work freely. I remember John Snodgrass told me, when you come to the office, I’ll spend three or four days with you and give you an orientation. And, the day I showed up at the offices, John said, “Ramesh, I’m sorry but I’ve got run out of town. My secretary will show you your office.” So, sure enough, his secretary took me down and said, “This is your office. Outside there, that’s Ruth, she going to be your secretary, along with Ken Rogers’ secretary. Good luck.”
And, I sat in the office for a couple minutes, and I went out to Ruth and I said, “So, how does the phone system work?” So, it was interesting. And, interestingly, a couple three weeks later, I asked John Snodgrass, I said “John, so when you bought the company, was there a business plan?” And, John said, “Yes. Open, retain, maintain.” That was the extent of it. But, think about this, Jonathan. When I joined the company, we were probably about, I don’t know … $500M – $600M company. When I left five years later, we were a $42B company. Those were some very exciting times. We went from a hotel company to a, basically an international conglomerate. We bought a Avis, we bought Century 21. We bought more brands. We bought RCI. It was hard to keep up with Henry, who I have the utmost respect for.
That must have been an incredible growth experience.
Yes, and I’ll tell you what the high point of it was, which goes to some of the things you been talking about and asking me. Around that fifth year, we were Hospitality Franchise Systems Inc. (HFS), and Henry decided to merge with a company called CUC. The merger went through and our stock was climbing every day, and it was a very exciting merger. And, I won’t bore you with what CUC did, but essentially it was a very, very exciting time. And, in fact, Henry told us at the time that, what we were going to do, from then on there were probably only four countries in the entire universe that could do that. We just put a tremendous partnership together. But right as we merged, as you may or may not know, we found that CUC had some skeletons in the closet in their financial reporting. They had been fabricating some revenue numbers to keep Wall Street happy, and we discovered that. And, their whole game plan was that, in the merger, that the amount of money sitting on the books as receivables which was fictitious would be basically written off as merger expenses, and Henry refused to do that. Do the right thing, at a cost, personally, off millions of dollars. Our stock went from around $42 to $7 that day. So it was a very, very hard decision. But, Henry said, “No. We do the right thing.” He could have gone along and said “Yes, merger expenses. Done with, move on.” But, he didn’t.
That’s one of those examples of leadership you’ll never forget because you lived it.
Thank you. Well, we’ve gone really long so I should wrap things up.
And we didn’t even get into PeachState Hospitality, which is that the new venture that you have. Do you want to spend a couple minutes talking about that?
Sure. It’s not so much a venture as a challenge, and I love challenges. I was doing consulting work for PeachState which is essentially – the leader at PeachState is Danny Patel, and you know him really well, past chairman. I was doing consulting work for Danny on his policies and procedures, similar kind of work that we did at AAHOA, and the more we looked at it, the more Danny kept bugging me about coming to work for him full-time. And, he felt like that was an easier way to transition his business that he wants transitioned. And, essentially, it goes back to what we were saying earlier. I have taken the challenge of re-structuring the management company for Danny, and he currently has under a management company, nine hotels operating. We have one more under construction, and he has, believe it or not, ten more under development. So, very rapidly growing company, and I’ve got to play catch up with him, and build a management company and the structure and the culture to run all these hotels he’s building.
Well, he chose the right man for sure and I know that you’ll excel in that area.
Well, you can tell me that two years from now.
Okay, I’ll trace it on the calendar to follow up. I’m sure that there are listeners that might want to reach out to you. What’s the best way that they can find you online?
I’ve had this email forever and ever, and It’s rameshotel at aol.com, with one H.
Well look, Ramesh, I really appreciate your time today. I always, always enjoy having conversation with you. I just think it use have so much to offer. You’re such a real person, very honest, and I hope that we captured some of that today for our listeners.
Thank you Jonathan for thinking of me, and keep doing this work. This is great stuff.
Thanks for Listening!
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