By Lavina Melwani

Indian hoteliers graduate to the big league.

One thing is certain: If the Patels had been around before the birth of Christ, Joseph and Mary would not have had to hear the stressful words, “No Room at the Inn.” These tenacious moteliers, noted for turning rundown properties into successful ventures, would have somehow managed to find room to accommodate two more people!
Indeed, what started out as modest mom and pop operations in the 1950s and was often the butt of motel/Potel jokes has evolved into a true American success story. We’re talking $38 billion – that’s billion with a B – the market value of hotels belonging to the 6000 members of Asian American Hotel Owners Association (AAHOA).
Together this miniscule percentage of the American population owns more than 18,000 hotels with one million rooms. They hire 800,000 people and own over one third of all the hotels in the United States. When you look at the mid market segment, they own a whopping 50 percent of the hotels. Not bad for an immigrant population that came with just a suitcase to this country and ended up providing a roof, a TV and a comfortable bed to millions of travelers across America, reliving the Hindu maxim of hospitality, “The guest is God.”
The vast majority of these Indian motel owners came from India, England and Africa, where their lives had been disrupted by the whims of the despot Idi Amin in Uganda. They also came from Kenya and Malawi, seeking better life and education. Most brought assets with them and a common cultural link. In fact, their common Gujarati heritage and the Patel clan connections were a source of strength and family unity.

B.U. Patel’s Tarsadia Group has some of the swankiest Indian American hotel properties.
Many of these would-be hoteliers came to the United States in the late 1960s and 1970s for higher education in accounting, mathematics, engineering and medicine. Family members followed from India and England on family reunification visas, thus providing many more hands to run entrepreneurial ventures.
“What you are witnessing is an American Dream that our members are pursuing. You see it in the growth of AAHOA and the entrepreneurial spirit being showcased in the hotel landscape of the United States,” observes Fred Schwartz, president of AAHOA.
AAHOA is an advocacy group in the hospitality industry. It publishes AAHOA Lodging business magazine and organizes educational seminars, regional trade shows, legal services for its members.
“There is tremendous family support and without this the growth would not have been as fast as it has been,” says Hasmukh Rama, the head of one of the most successful hotel families, the JHM Group, based in Greenville, S.C. The Ramas are Gujaratis from Africa and all five brothers — Hashmukh, Jayanti, Manhar, Denu and Raman — have combined their diverse expertise in fields like architecture, accounting and engineering to create a corporation which owns 38 hotels. Hashmukh Rama speaks of a sense of community, in which more established members of the community provided advice and financial help to newcomers. The hospitality industry was a popular choice because it offered immediate housing and cash flow, as well as a chance to get a toehold in America despite cultural and sometimes, language barriers.
The early years were not without problems, as many of these hoteliers met with resistance, especially from bankers and insurance companies, some of whom subscribed to an Indian conspiracy to buy hotels, burn them, and collect on insurance. There was also an underlying racism, with “American owned” motels signs shoving elbows at guests contemplating the hospitality of those run by “foreigners.”
When Little India did a cover story on the motel industry in 1994, the Indian hoteliers were already a force, having created a $20 billion empire from sweat and elbow grease, building a mighty hospitality structure, one small mom and pop establishment at a time, through family unity, sheer hard work and “Patel equity,” where members of the community helped their kin to get ahead with loans and other support.
Now, almost a decade later, Little India revisited the motels — and found some big changes. First things first: these Indian American entrepreneurs no longer like to be called “moteliers,” having upgraded themselves to the status “hoteliers.” You won’t find too many independent mom and pop outfits anymore, as franchised properties have become the rage.

Tarsadia Hilton.
Even in 1994, many Indians were getting into the mid-range franchises and 30-40 percent of Holiday Inn, Days Inn and Comfort Inn franchises were operated by Indian-American. Many small motel owners who had independent no name brands have moved on to mid-range franchises, such as Choice Hotels, Best Western, Baymont Hotels, and Carlson, which includes the Country Inn and Suites.
Cendant Corporation’s Hotel Group, based in Parsippany, N.J., is the world’s largest lodging franchiser with 6,551 open hotels representing 539,482 rooms on five continents under the Super 8, Days Inn, Ramada, Travelodge, Howard Johnson, Knights Inn, Villager, Wingate Inn and AmeriHost Inn brands. Almost 40 percent of Cendant’s hotel franchisees are Asian American. Now hoteliers are expanding their reach, adding on classier, bigger properties like Marriott, Holiday Inn and Hilton, which also owns Hampton, Six Continents, and U.S. Franchises. B.U. Patel who started out in 1976 with a single 20-room Dunne Motel in Anaheim, Calif., has with his two sons Mike and Tushar, created a portfolio of hotels which include full-service and all-suite properies, including the AAA Four Diamond award winning 476-room Marriott in San Mateo, Calif.
Tarsadia Hotels also redeveloped the 400-room Hyatt Regency Orange County near Disneyland Resort into a 670-room, 60,000 square foot conference center and convention hotel. It has also completed an extensive $25 million makeover of the lobby and guestrooms at the 1033-room Anaheim Marriott.
Indeed, many hoteliers are steadily moving to bigger and more upscale properties. According to Naresh ‘Nash’ Patel, secretary of AAHOA, “Our members run 57 percent of the economy lodging industry, and we’d like to take that to 75 percent. We have 36 percent of the full service hotels and we’d like to add at least another 10 percent in the next few years time. It’s a very achievable task given how the community has taken and harnessed the industry, and we provide our members the expertise to secure financing and develop hotels.”
So who are the biggest names in the hospitality business?

Mike Amin with AAHOA keynoter Bill Bennett.
Mahesh Mike Amin, chairman of the AAHOA Board, is reluctant to name names as he says such a list would be highly subjective. “Most of our membership is privately held and there are very few publicly traded or investment oriented companies out there. Most of them are independent operators — majority of our members own one, two or three assets. They are not large management companies or hotel corporations, but yet are a significant percentage in the hotel industry.”
But there are a handful of big players. Such as BU Patel and his sons Mike and Tushar of the Tarsadia Hotels, in Orange County, Calif., with over 16 properties; the Rama brothers of JHM Hotels, which has close to 3,800 rooms; the father and son team of Bharat Shah and Mitesh Shah of Noble Investments, based in Atlanta, Ga., owning about 25 properties; Shree Hospitality Group in North Carolina, headed by Ravi Patel, has 24 hotels. The Diplomat Companies headed by R.C. Patel and his brother Mike Patel operate several hotels in the Southeast.
The second — and sometimes the third — generation has come of age, the family-owned businesses are getting a fresh shot in the arm from young blood. Getting into the saddle is a savvy band of hoteliers who may have grown up as “motel kids,” but are bringing their American education, professional expertise and way of life into their parents’ business.
The current AAHOA chairman Amin, is just 37 and is a third generation hotelier in California. “Ours is a simple story, no different from any other immigrant who immigrated to America,” says Amin, whose grandfather migrated from Surat in Gujarat to San Francisco in 1953: “He was fortunate to be chosen for a lotto system of immigration from India to America, which existed in the late ‘40s and early ‘50s. Through savings and hard work, he managed to lease his first hotel in 1956, in an alley in the South of Market area in San Francisco.”

Rama Brothers.
That initial property has expanded over the years to The Amin Group, a commercial management and development firm with several properties. Mike Amin, who studied economics and business at the University of San Francisco, and earned a BS in finance and marketing, brings expertise in new venture management, financial management and real estate law and analysis, to the table.
He has been active in AAHOA, advocating political awareness, grassroots activism and ongoing education for independent hoteliers. He says, “Education and second and third generations entering the business is not only good, but adds more quality to the overall product and operation.”
Amin is just one of the many American-born children of immigrant hoteliers who are helping to take the hospitality business to the next level. D.J. Rama is a second-generation hotelier whose father and four uncles founded the JHM Group. D.J. Rama, who completed his masters in hospitality management from Cornell University, is the first of his generation to join the family business, while others are still in college.
“A lot of the AAHOA members are graduating themselves and upgrading their portfolios, selling these smaller properties and moving into larger markets with a higher brand name,” says D.J. Rama, who is a director of the organization. “Because they now have a stronger balance sheet they’ve been able to leverage that to borrow more money and to build or purchase hotels and reposition them in the marketplace.”

Sudhir and Priti Patel.
He adds: “The Asian hoteliers’ performance has been outstanding. It’s a recognized force today than ever before; people know they don’t have a choice but to do business with them if you want to grow. Brands — like Hilton, Holiday Inns or Marriott — they have all come to understand what AAHOA is and how important its members are to their growth.”
According to D.J. Rama almost 90 percent of the second-generation joins the family business after their education, and many want to jump into big brands and upscale properties: “They are all very aggressive, like tigers, who are wanting to move with speed. Sometimes, it is dangerous, because you ought to take natural steps rather than jumping steps — and that’s the issue with second generation. We have a big balloon, but sometimes we don’t realize that the air can go out in the real world. But it’s good to have that energy level.”
He believes the second generation brings in new talents, looking at the business from different perspective, undertaking projects they can be proud of, and not simply projects just to get by with. They often convince their parents to pursue bigger brand names to attract more customers and are well educated on how to put the project together.
“The other thing the second generation brings to the table is marketing skills. You can build a hotel but if you don’t have the skills to market the hotel, then you’ve basically failed,” Rama says. “So they bring the skills they have learnt from this society on how to market a product. I feel the education environment probably must have helped tremendously, which it did for me.”
The JHM Group, like other bigger companies, also depends on outside professionals, rather than just the family, as it expanded. As Rama points out, You need more professionalism, more talent, which will take you to the next level. It’s people who take you to different levels. Outside talent can keep the company growing.”
Another second generationer playing an active role in the hospitality industry is Naresh Patel. He is a self-confessed “motel kid” who grew up monitoring the front desk or vacuuming the occasional motel room. His parents first came to California in the 1970s from India via England and leased their first hotel in Los Angeles.

R.C. Patel.
When Nash, the youngest of six children, was only 9, his father died. The family relocated to Florida and operated a small 14-unit motel in Pensacola, with everyone pitching in. He recalls: “We used to do our chores before we left for school. I would check out the rooms to make sure the air-conditioning was turned off and after school; we’d do our fair share of watching the front desk. On weekends we’d do a little bit of housekeeping as well.”
Gradually, as the children grew up and went to college. They got more involved in the business and developed their first new construction in 1990 and from there they moved on to buying, selling and developing hotels. Today Nash Patel and his older brother Jay are partners in Amerifirst Network, Inc., a Built-to-Suite Development Company, which specializes in the development of hotels, motels and convenient stores, quick serve restaurants, office buildings and strip centers. Nash is Senior Vice President of Lodging Hospitality Systems, Inc., and a company franchising the Asbury Suites & Inns.
Nash, who is secretary of AAHOA, and his brother Jay have been actively involved with the organization. Jay, who was one of the youngest board members, has researched the issue of franchising and authored a book titled Franchising: is it Fair? He says, “I’ve been an advocate of trying to change the way we do business in franchising.”

Diplomate’s AmeriSuites.
He points out that franchise agreements are always so one-sided — franchise companies want agreements their way — and if something goes wrong, the franchisee could end up losing his life savings. In his book he outlines how one could get franchises to negotiate fairly with you and the book was adopted by AAHOA and given to all its members. He assited the AAHOA in developing its 12 principles that franchise companies should adopt to make the transactions more equitable. He says, “Because of AAHOA’s ability to push, today I believe about 70 percent of franchisers have adopted the AAHOA 12 points. Everybody in the industry agreed that our points were not anything that was in favor of franchisees, but just reflected fairness in business.”
Jay Patel also emphasizes the expertise of the second generation of hoteliers in technology: “They do a lot of e-commerce, they handle the hotels via the Internet as far as reservation goes. From what it was in the past — the hoteliers did not know the technology — but now there’s a lot of technology involved, and that’s just the way the industry is going.”
Second generation hoteliers are the ones who are knowledgeable of the financing aspect as well, so they are the ones out there hustling mezzanine and other creative financing solutions. Explains Jay Patel: “That was not there for the first generation of moteliers, because there was no education provided to them on how they can obtain financing. They were fortunate to find the properties through owner financing and some used to lease hotels, because it was hard to get financing.”
Another noteworthy trend in the industry is the active involvement of women. Earlier whole families were involved in the upkeep and running but now young women are approaching it in a more professional way, pursuing degrees in college to equip themselves to join the industry. Priti Patel, who graduated from the University of Tennessee with a degree in business and property management, returned to the family business to develop a new Country Inn & Suites in Kennesaw, Ga.
While her husband Sudhir is a project coordinator for Delta Technology, Priti has embraced the business she grew up in. She recalls, “My mom and dad had an independent hotel and we lived on property. So we did everything; operations is what I did my whole life. If a maid didn’t show up, you lent a hand. I wouldn’t be the one sitting in the corner, crying.”
Operations mean everything from accounting to sales to front desk to housekeeping, and Priti Patel has done it all. She has seen the properties themselves change from 18, 20, 30 rooms to an average of 50 or 60.
JHM Hotels.
She says, “I feel the second generation just is more professional and they take care of business outside of family. We separate it a little more than are parents did. That’s the way I view it. We have a tendency to keep employees and business really separate from home. We’ve all moved up from independent mom and pop franchises and are now moving more into the Hiltons and Marriotts now.”
Patel has seen the participation of women increase over the years in the management of hotels as well as in AAHOA. She recalls, “When I first started in 1997, I was one of two women who got elected to the board, along with 30 men.” Since the participation of women was very low at conventions, AAHOA decided to have a women’s conference to get them involved and over 500 women attended that first leadership conference Surekha Patel, who was AAHOA’s
chair for the Women Hoteliers Committee in 2000 and 2001, continued the task by introducing new programs and events. Surekha, along with her husband Chandrakant, is a founding director of the State Bank of Texas, which has $150 million in assets and has four branches.
9/11 has impacted the hotel industry. Fear of terrorism, security concerns, a ravaged economy and the prospects of an impending war have taken their toll. Says Mike Amin, “It is very difficult out there. It’s in a holding pattern right now. There are very few new developments. Right now with travel, tourism, corporate spending, tech business, everything being on the downward trend, I think most of our members are basically holding on and trying to cut costs, and effectively manage those properties as best as they can. People are rethinking their investment strategy.”

Nash Patel.
Indeed, D.J. Rama points out: “The people you depend on who travel the roads every day are the people who are sitting there watching events unfold on TV and wondering ‘Should we be out there spending the extra hundred dollars that we have for this weekend?’ So the situation .has indirectly affected 99 percent of the hotel owners and they will have to find ways to weather the storm.”
Priti Patel says a lot of properties in Atlanta are hurting with occupancy rates down significantly. She says, “I was just telling a friend that in the ‘80s when business was slow, I was so young I didn’t really know. Our parents lived through it. Now it’s our turn to live through situations like this.”
She says they’ve had to become more hands-on and cut back on staffing.
Across the hotel industry there is considerable belt-tightening and new projects have been put on hold. The more upscale properties have been harder hit than the limited service segment, where costs can be cut faster.
According to Pricewaterhouse Coopers, profits in the hotel industry declined by 27.4 percent from $23 billion in 2000 to $16.7 billion in 2001. Profits grew nominally to $17.2 billion in 2002, as a result of cost reductions. Although the economy remains troubled, 2003 profits are forecast to rise to $19.8 billion.
“Had the industry not responded quickly, profits would have decreased by 7.8 percent to $15.4 billion this year,” says Bjorn Hanson, PricewaterhouseCoopers Hospitality & Leisure Practice. “Some of these cost reductions seem to be institutionalized, and some can only continue for a limited time or they will affect the quality of facilities and guest service.”
D.J. Rama says these are one of the worst times hoteliers have seen, with the lowest occupancy rates in 31 years: “The industry will rebound, but it will rebound with discipline. The corporate people who used to come to us are more disciplined about spending their money or making visits to corporate offices. They may make five phone calls rather than a visit. It’s not going to be the way it used to be. So what we are doing in our company is making sure that our discipline is in place for taking any level of business and making sure we are successful at it.”
Some hoteliers are also realizing that all the eggs shouldn’t be put in one basket, and are diversifying into different fields.

Almost 40 percent of Cendant Corporation’s properties are Asian
R.C.Patel and his brother Mike head the Diplomat Group of Companies and are prominent in the lodging industry. They came to Alabama. in 1980, from England, via East Africa. In London, they ran corner shops and operated a small bed and breakfast establishment. They purchased their first Holiday Inn, becoming the first Indians to own a franchise hotel in Alabama. Over the next 20 years they bought and sold 45 hotels. Today the Diplomat Group currently own 17 hotels with 3,000 rooms in the Southeast, including Red Roof, Hampton and Best Western brands.
Three years ago they founded the Horizon Bank in Atlanta and they also offer SBA financing, which is crucial for financing for property purchase. Observes R.J. Patel, “The way the landscape of America is changing, we felt there was a need for a community owned Indian bank.”
They pulled friends together and after 18 months managed to get a charter from the banking commission. Today the bank has $90 million in assets and its clients include the hotel community, convenience store owners and physicians looking to buy medical practice buildings. “The future of the hotel industry is not too good. There’s no money to be made in operations, because people are using the Internet boom to shop rates, and the rates are coming down,” says R.C. Patel. “The occupancy is still around, but the rates are not there.” He points out that eight years ago, after the last recession, people still made money but this time around it is much harder. New developments across the country have halved, with just 80,000 new rooms being built from a high of 160,000 hotels.
With an eye on the ledger, the Diplomat Group has diversified into development and construction and has been selected by Six Continents to develop its new prototype of Holiday Inn. The brothers have also started an insurance company and R.C. Patel’s sons, who are studying investment banking and risk management, will join them in the diverse family business.
As the hospitality industry reinvents itself to reflect the changing environment, the family closeness and affinity for this business will ensure that Indians continue to play a leading role. D.J. Rama who grew up in motels and hotels now is father to a toddler. Does he see him joining the family business?
“He’s only four years old, so it’s hard to predict!” he laughs. “But I’d love for him to join and take the business to the next level. It’s like we are building sandcastles near the ocean — our fathers built one — and we’re always afraid that while we are sleeping at night, it might get washed away. “As a child I was always brought up to believe that you have to protect your father’s sweat equity, the hard work that he and his brothers did. I hope my son also comes in and makes sure that the sandcastle is protected from the ocean and never gets washed away.”

..- End Of Article.....