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For
over 60 years, Sonesta has owned, managed, designed, built and marketed hotels throughout
the world, and now looks to grow with cash from its recently announced Key Biscayne
transaction
Services
Lodging
(SNSTA-NASDAQ)
Sonesta International Hotels Corp.
116 Huntington Avenue
Boston MA. 02116
Phone: 617-421-5400
Peter J. Sonnabend
CEO and Vice Chairman
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
July 2005
BIO:
Peter J. Sonnabend
C.E.O. and Vice Chairman
Sonesta International Hotels Corporation
In 1987, Peter J. Sonnabend joined Sonesta International Hotels Corporation, the hotel
business his grandfather, A.M. Sonnabend, created in 1956 as an outgrowth of
Sonnabend-Operated Hotels. As C.E.O. and Vice Chairman, Mr. Sonnabend oversees the
legal affairs of the company, and assists in its financial, insurance and development
programs.
In 1995, Mr. Sonnabend was elected to Sonesta’s
Board of Directors, and presently serves as Vice Chairman of the Board.
Prior to joining Sonesta, Mr. Sonnabend practiced law
with the Boston law firm of Winer and Abrams.
His professional affiliations include membership in
Logan Airport’s Business Advisory Group. An avid enthusiast of contemporary art, Mr.
Sonnabend serves as a trustee of the Institute of Contemporary Art in Boston.
Mr. Sonnabend is a 1976 graduate of Wesleyan
University, CT, and received his J.D. from the Boston University School of Law in 1980.
A native of Boston, he now resides in Weston, MA with his wife Karen and their two
daughters, Lauren and Kathryn.
Company Profile:
Sonesta Hotels, Resorts & Nile Cruises, based in Boston, represents a collection of 22
upscale hotels and resorts and 3 Nile Cruise ships. Founded in the 1940's, Sonesta has a
long-standing reputation in the hotel industry for offering properties that are designed
to deliver uncompromising personal service, reflect the culture and history of their
location and provide a memorable experience unique to each hotel. Sonesta's
properties are located in Boston, New Orleans (2), Miami (3), Orlando (2006), St. Maarten,
St. Lucia (2006), Brazil, Peru (6), and Egypt (9). For more information about
Sonesta, call 1-800-SONESTA (800-766-3782), or visit Sonesta's website at
http://www.sonesta.com.
CEOCFO: Mr. Sonnabend,
how has Sonesta changed under your leadership?
Mr. Sonnabend: “Ours is a public company and also a
family business, and there are many family members involved in the business who are also
owners of the business. We are in a transition period between many years where leadership
was provided by my uncles, Roger and Stephen Sonnabend, and my father, Paul Sonnabend.
They are still very much involved in the company but they are well into their seventies.
We are transitioning now to leadership under my cousin Stephanie, who holds the title CEO
and President, myself, and other family members. It is difficult to say how the company
will change. Our intent is to maintain those parts of the company that come to us as a
legacy and then, through new methods, technologies and ideas, and perhaps a different kind
of risk-taking, lead the company into the next generation.”
CEOCFO: What are you
looking to do that has not traditionally been done?
Mr. Sonnabend: “We are looking at properties that differ
somewhat from the type of properties that we have been operating over the past several
years. For example, we have seen the introduction of condominium hotels in the
marketplace. This is an idea that came to the United States from Latin America,
and has been very popular in Brazil. The concept has come to Miami in the last four to six
years. It is a form of hotel development where hotels are financed by selling off rooms to
purchasers who then lease them back into a rental program. You end up operating a hotel
that looks and feels like a traditional hotel but has no debt. We have worked with
developers to create this kind of hotel and currently operate two condominium hotels under
the “Sonesta” brand today in the Miami area: one in Sunny Isles Beach and one in
Coconut Grove. We announced in January that we are creating an ultra luxury condominium
hotel on the site of our Key Biscayne hotel, which is a 10.5-acre site on the beach in Key
Biscayne. That hotel will come down in August of 2006, and we will begin the two-year
process of creating the new property. In terms of other things we are looking at, we
signed management contracts for a small but very up-scale property on the island of St.
Lucia in the Caribbean and a large thousand-room property, which is being developed in
Orlando. We are looking at different opportunities and thinking about possible
acquisitions, and hopefully the public will see an expanded Sonesta hotel company over the
next few years.”
CEOCFO: You own, manage
and license. Why the different approaches?
Mr. Sonnabend: “Management gives us control over the
day-to-day operation of the property. We manage in the United States and we operate the
hotels in Egypt. We have elected to look at franchising, and licensing is really
franchising. We have been franchising in Italy, Peru, Brazil and St. Maarten. In those
situations, we are providing our brand and marketing support to those properties but we do
not have day-to-day control over the operation. We try to be very careful in protecting
the Sonesta brand and only franchise to those operators we feel are not only committed to
operating very good hotels, but who share our values.”
CEOCFO: How important is
location?
Mr. Sonnabend: “In the past we have been opportunists;
we have been reactive rather than proactive. We established strong reputations in the
markets where we have operated and those have been Boston, Miami, and New Orleans. People
familiar with those properties have come to us and asked us to participate in hotel
projects in those geographic areas. We are trying to expand our brand into other parts of
the United States. In terms of management or acquisitions, we are looking at opportunities
in Phoenix/Scottsdale, Chicago, and New York. We are still considering
opportunities outside the United States, but they will only involve management or
franchising, not acquisitions.”
CEOCFO: What sets a
Sonesta hotel apart?
Mr. Sonnabend: “In the United States, when you come into
a Sonesta hotel, you are struck initially by the artwork that you see in the lobby. You
would also be struck by the friendliness of the staff, the desire to provide personal
service, and as you became acclimated to the hotel and explored it a bit, I think you
would find that each of our hotels embodies the culture of its location. In New Orleans,
if you went to the restaurants or lounges, you experience Creole cooking and that would
identify the location as New Orleans. You would hear the music of New Orleans. You would
see artwork and décor suggestive of that area. You would find the same ideas reflected in
South Florida where we have the three properties and in our Boston hotel.”
CEOCFO: Do you do much
advertising?
Mr. Sonnabend: “When people travel on business, they
focus primarily on location. When they are traveling on vacation, they are focused more on
facilities and amenities. At our resort properties in South Florida and New Orleans, we
have established reputations and have locations, facilities and amenities that attract
people and we do a lot of repeat business. Today, the internet plays an increasing role in
attracting transient guests and we have been active in setting up a user-friendly,
attractive and perhaps even fun website where people can access our properties and learn
all about them. They can take video tours, see the menus in our restaurants and book
directly with us. We spend a lot of time thinking about how to market our properties.
Because we have so few properties, we make the custom-tailored, individual marketing plans
we prepare for each of our hotels the cornerstones of our marketing efforts. We believe
that gives us an advantage as we compete against the larger chains with their much larger
corporate advertising budgets.”
CEOCFO: How do you
ensure the quality of service?
Mr. Sonnabend: “We do it in a number of ways. Primarily,
after we recruit and hire people, they go through a period of orientation and training. We
have trainers onsite at our various hotels. Some years ago, we established an in-house
subsidiary called Training By Design, which provides extensive hotel training in all of
our hotels. Training By Design has, in fact, become so innovative and successful that it
provides training services not only to other hotel companies, but also to other
organizations, which seek to increase the level of personal service in their companies --
whether they are hospitals or law firms or other non-hotel establishments. We have always
valued employees as an essential part of providing a wonderful hotel experience and spend
more than other companies in terms of time and money making sure our employees are well
trained.”
CEOCFO: What is the
financial picture for Sonesta?
Mr. Sonnabend: “Recently we have seen a change in our
financial circumstances as a result of the deal we announced in January regarding our Key
Biscayne property. What has happened in South Florida in terms of the level of development
and the corresponding increases in the value of real estate is rather stunning. We have a
10.5 acre parcel on the beach in Key Biscayne, which is a stone’s throw from downtown
Miami and South Beach. For 36 years, we have run a hotel there, and it has been a great
success and people love it. The value of the land was so great that we felt we had to
develop the property further to exploit that value. In thinking about ways to redevelop it
and in conversations with potential local development partners, we determined that the
best thing to do was take the hotel down and build a new hotel in a joint venture with
Edgardo Defortuna of Fortune International. Fortune is the dominant real estate broker in
Key Biscayne and one of the largest in South Florida. They have also been involved in
developing real estate in the area. With Edgardo’s expertise, we established a value
for our land in Key Biscayne of $120 million -- a rather staggering sum. We structured a
deal where Sonesta received $60 million dollars in April when we closed the sale of this
land to the new partnership that we created with Fortune. We will receive another $60
million on a priority basis as condominium units are sold in the new project. This means
that our company will realize total cash of $120 million dollars over the next three to
four years. We have already received half of it. Sonesta will also manage the new resort
and own 70% of the non-guestroom spaces. This deal has changed the financial picture
at Sonesta, providing us with cash for our foreseeable operating needs,
and for possible acquisitions.”
CEOCFO: In closing, is
there much float available for the potential investor, and why should they be interested?
Mr. Sonnabend: “Regrettably, there is very little float.
The Sonnabend family controls in excess of 60% of the Company’s stock, and other
shares are held by long-term holders. For investors looking for a stable investment in a
company that has third generation leadership with a family committed to the hotel industry
that is growing its brand, Sonesta has certain advantages that other companies do not.
Most important is the stability of leadership. The family is committed not only to running
the Company but to growing it, as well. Stephanie’s daughter Antonia has made the
decision to enter the hotel industry and will enroll in Cornell University’s Hotel
School this fall, so perhaps there will be a fourth generation of Sonnabend’s
providing leadership in Sonesta in the future. The primary thing for us is to make sure
that our select group of hotels is run as well as it can be and that each hotel is as
exciting visually as it can be. We believe that, by partnering with others, we can expand
the Sonesta brand across the country. These are big plans, but we do not think they are
unrealistic. We are focused and committed.”
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