Alex Mowczan’s Suite Life: Part II in the Tale of TC’s Hotel Titan
Last month we featured the first in a two-part profile of TC hotelier Alex Mowczan (read it at tcbusinessnews.com).
When we left off, Mowczan, who had spent his early 20's climbing the hospitality industry ladder in puruit of one day owning his own hotel, was reeling from the sudden death of his parents …
Mowczan stayed with Motel 6 until summer. Then he quit, retreated, and threw himself into the fixing up and clearing out of his family home and rentals. He combined the money from the houses and the small life insurance policies his parents had left him, handed it all over to Merrill Lynch, and for the next several years, he says, "I did nothing."
It should be noted that Mowczan's version of doing nothing might better translate to: doing nothing … toward achieving his hotel dream. In the years after his parent's death, Mowczan says he was bored and lazy, that he watched a lot of TV. Fortuitously perhaps, he became "obsessed" with CNBC. In between shifts of Squawk Box and After the Bell, he began calling his Merrill Lynch advisor almost daily for hours-long conversations about the stock market's workings. His inner businessman eventually re-awakened, and Mowczan set to learning as much as he could. Soon, he began day trading on his own. And then?
"I made a killing," he says.
In December 2000, Mowczan got a call from a cousin who had been Up North; the 111-room Traverse City Best Western was up for sale. The price tag? $4.9 million. Moczan did the math: "It was doing about $1.2 million in sales. I figured if I could pick it up at $40,000 a room, invest another $10,000 a room … ." He rattles off a string of percentages, rates and dollars – down payments; capitalization rates; comparative per room, per dollar estimates of other hotels for sale; the conversion of a typical 80/20 SBA loan split to an 80/10/10 split amongst the bank, himself and the seller – all of which comes to this: Sight unseen, Mowczan made his offer. Drained his stocks. And on May 1Ë?23, 2001, became the proud owner of a 111-room hotel on the main drag of one of the busiest summer resort towns in the state of Michigan. He was 29 years old.
The hotel, which had been family owned, hadn't been updated in 15 years. Alex knew this going in. He understood that the solid blue carpet on the floor of each room was streaked with a worn gray footpath between its front door and bathroom. That the ceilings of some of the loft rooms showed water stains around the skylight. He had expected some improvements would have to be made. What he did not expect when he checked the hotel's past Product Improvement Plans [PIPs], the bi-annual recommendations handed down from the parent chain, was that, despite its wear and water spots, the hotel had passed muster – year, after year, after year.
So when corporate arrived to inspect the hotel three months after he'd purchased it and started his own upgrades and improvements, Mowczan wasn't worried. A passing grade, he assumed, was imminent.
Somehow, after scads of near-flawless inspection reports, the hotel suddenly was deemed a failure – one in need of massive updates – among them new drapes, new carpet and a new $95,000 roof.
What had happened?
"I wish I knew," says Mowczan. "I still don't understand it … Had I known [before I bought the hotel], I would asked for a bigger loan to begin with.
"So with my tail between my legs I had to go back to the bank and say, 'I screwed up. I need more money,'" he says. Across the table he laughs and shakes his head: "Novice mistake."
Dark clouds, silver linings. Storms, calm. Mistakes sometimes can end up a blessing, and for Mowczan, this one truly was. He got the additional loan he needed to update his new hotel, and thanks to that first failing grade, Mowczan's Best Western Four Seasons has been on corporate's radar ever since. Corporate quality inspectors now arrive every five to eight months. Sometimes they'll give the hotel 72 hours notice; other times, they'll give only 24.
Does it tick him off that because of one failing grade, his hotel has been made a target?
Mowczan's eyes open wide. "No!" he says. "That's awesome! There's so many bad hotels out there [in the Best Western International chain]. If somebody stays at one of those dumps, they're not staying here."
Quality Inspections, in other words, force the dumps within the chain to improve or else lose their link altogether, keeping them from ruining business for other licensees. Likewise, they allow the cream of the hotel chain to rise to the top. And Mowczan's Best Western has done just that. At its most recent inspection, in January, it scored 982 out of 1,000 points. It was the hotel's fifth consecutive inspection score to exceed 980 points, the level at which a hotel earns the coveted Best Western Chairman's Award. Only about 5 percent of Best Westerns achieve this in a given year. Mowczan's managed it three years running.
When Mowczan began building his small empire of Traverse City hotels in 2001, only beachfront hotels occupied Trip Advisor's top three spots. Since then, Mowczan-owned hotels have edged out every one, stealing and holding steady for the last year in spots No. 1, 2 and 3, Cambria, Comfort Inn and Best Western respectively – though none of them sit on the bay.
Mowczan says he and his hotel staff woo guests with a far less obvious weapon than water: "We kill 'em with customer service."
"Anybody who stays at one of our hotels is going to come back and be loyal," he says. "Downstaters? They're used to being shit on. But they come up here, we call them in their room to see if it's OK. We put goodies bags in every room. We offer a hot breakfast every morning. We do soup at night in winter, strawberry shortcake in summer. Our housekeepers don't hide, they engage. We don't have one concierge; the whole front desk is doing that job. From maintenance to management, it's all about customer service."
Mowczan knows that making his mantra become his staff's daily mission doesn't come cheap. It's a oft-reported fact in TC hospitality circles that Mowczan pays his people better wages than any other hotel in town. He also pays them weekly, rather than bi-monthly. And he has no qualms about stealing employees from other hotels.
He counts among his greatest coups the wooing of his properties' Director of Hotel Operations, Ron Robinson, from Holiday Inn Express in January 2008, and from the former Heritage Inn (now Howard Johnson), Best Western General Manager Russ Cole – who won the Michigan Tourism Association's award for best general manager in the state in 2008 .
"I have the best people because I pay for the best people," Mowczan says. "At the end of the day, you look at the bottom line, and maybe I'm not making a lot of money … "
An awkward silence fills the room. He – the guy in the bespoke suit who owns hotel he's sitting in – waves his hands like a panicked crossing guard. "No, really! I wish I had money! Cambria took all my money! I'm poor!"
Maybe this is true. Maybe it isn't. But when it comes to money, whether Mowczan's rolling in it or starved for it, one thing is for certain: Whatever he's got, he invests.
Mowczan's empire began at age eight with a bottle of Purple Sparkle window cleaner, remember. A shovel. Then a snowblower, lawn equipment and a working crew. Eventually, a rental house. More rental houses. Some stocks. Finally: a hotel.
The realization of a childhood dream as a sensible stopping point notwithstanding, after buying Best Western in 2001, Mowczan bought an apartment building – TC's Forest Hills – in 2004. The next year he began renovating the house he'd bought for himself in '03 (Mowczan spent his first years in TC living in a room inside his Best Western). He didn't begin the house renovations because he thought moving the garage to the other side of his East Bay-fronted house would look nice. He did it because an architect from Harbor Springs guaranteed it would double the value of his property, and if it didn't, the architect promised he'd buy the property back. (The architect, Fred Hackl, would become one of Mowczan's most trusted friends, business partner and investor in two of Mowczan's hotels.)
Still, by 2005, Mowczan was feeling itchy. He wanted a new project. A new hotel. But land was pricey. The recession was on, and bank loans were tight. Still, he saw a niche market going unfulfilled in northern Michigan: business travel.
"The CVB says 80 percent of the travel Up North is tourism; 20 percent is business. A small chunk, right?" Alex asks, his voice rising in pitch as he calculates aloud. "But when you looked at all the rooms available in Traverse City, only six percent of them – your Courtyard by Marriot, your Holiday Inn, your Hampton, your Park Place – catered to business travelers. There was no true all-suites hotel for that Sunday through Thursday crowd."
Mowczan figured he could afford to build himself a new hotel if he took one major expense out of the equation: land. Though his Best Western had proved itself profitable, he decided to tear down 37 rooms at its center, keeping the remaining 50 to the east the Best Western, and turning the remaining 24 to the west into an economy motel, Shadowland. The big hole in the center would give rise to his planned all-suites hotel, perfectly positioned on Traverse City's main drag, US-31, and available without Mowczan having to buy even an inch of additional land.
Genius, right? Sure. Except for one part: The banks wouldn't cooperate.
"We couldn't get financing," says Mowczan. For 10 months, he and Gerry Wagar, a construction guy out of Petoskey who had just lost his job with a bankrupted Detroit firm PRS, worked and reworked the numbers, trying to cut costs anywhere they could, but to no avail. "We were just too short, [the project] was just too high-priced."
Then Mowczan had an idea. What if he formed his own construction company to build his hotel? Hired Wagar to run it? He'd be able to shave off at least the 5 or 10 percent profit a hired company would need to earn, would require less loan and, ultimately, ensure he'd be able to make his mortgage payments and a profit. Mowczan formed Apex Construction, and with the land and the loan in place, Apex got to work erecting TC's only all-suite hotel, Cambria Suites. Within three months, Cambria was turning a profit.
"Generally for new hotels," says Mowczan. "That takes a year."
There's talk among hoteliers around town that Alex Mowczan is a little "off." He thinks big, spends big, takes the kind of risks few folks in this fickle economy would. In the last five years, while the goal for most in the hospitality industry was simply to hold steady and give up minimal ground to the recession's claws, Mowczan forged ahead. He hired additional staff. Renovated existing hotels. Built Cambria. Bought a Comfort Inn, renovated that too. Despite the early struggle to get financing for Cambria and the unknown future for any hotel's profitability, Mowczan pushed his loan to the limits in order to ensure Cambria's construction involved energy saving accoutrements galore.
And while Mowczan says he likes what the energy savings do for the environment, he's the first to admit he's more businessman than tree hugger. He knows those high upfront costs are going to translate to major savings in the long-term; but it's the long-term he lives for.
"Now is the time to be spending. All the others are cutting back. But we're adding employees. There's more salespeople. All the renovations we've done in our hotels – we look brand new," he says. "But all other hotels? They've stopped spending for the last three years!"
For the first time since the conversation began nearly four hours ago, Mowczan sets down his pen, slides away the notepad with which he's been fidgeting and leans back in his chair. The man with the plan isn't tired from talking. He's simply finished talking about his past. He's ready to tread in the place he's clearly most comfortable: the future.
He raises his coffee cup halfway to his mouth, then stops and, holding it mid-air, leans forward and practically whispers across the table: "When [the economy] comes back, the other hotels will be behind the eight ball," he says. "And we'll be all shiny and new. Like a new penny."
He sips from his cup, and I see for the first time that it's not straight coffee, as you might expect from a bear of a man who sits at a gleaming conference table in one of four hotels he owns. It's some sort of sweet affair, with a frothy white dollop of whipped cream on top.
He sets down the cup and, quickly wiping a trace of whipped cream from his lip, smiles, his grin stretching wide against the round apples of his freckled cheeks . For a brief second – despite his suit and wealth and the refined space surrounding him – Mowczan looks like an eight-year-old kid. One with a bottle of purple Sparkle. And a big – really, really big – plan. BN