By Robert A. Rauch, CHA
In 1974, I attended the University of Illinois as an English major. I had recently dropped out of Pre-Optometry at Indiana University and my father had said, “I don’t care if you major in English, just go back to school!” Ok, dad, I figured, English it will be, but I am transferring next semester to another school. It did not take long for me to realize I needed to make a living now that I was paying for school. An ad in the school newspaper read, “Banquet Dishwashers Needed for Convention Hotel.” I applied and was told I was overqualified. I said, “What? I’m 20 years old and need to work. Plus, I speak Spanish! Does that help?” I was hired immediately.
The job lasted less than one month before I was promoted to busboy, then waiter and within six months, Banquet Captain. I loved serving guests and thought I was smarter than my managers. Pretty soon, bored with English, I set my sights on hotel school. Transferring to Florida International University, I met professors with real hotel and restaurant experience and found a job as a Sales Manager at an airport hotel. I received job offers from 4 international chains to start in their management training programs and chose Ramada Hotels. I can assure you, my stints in the field were not all roses. I was transferred several times with hopes that I would eventually help the company and learn from my many mistakes.
I began to have success over the years and eventually became a General Manager. After that, I landed a position as Director of Education & Training at Best Western International and finally, with what is now Deloitte, I served as a manager in the Phoenix office hospitality practice. It was there on a July 4th weekend in San Diego that I met my wife and decided to settle down in San Diego and start what is now RAR Hospitality. We started the company as R. A. Rauch & Associates because my friend Rick Zurburg, then of Holiday Inn University, told me to use my name rather than invent some company called Hospitality Consultants or something vague like that.
The week after I moved to San Diego, we started the firm— 16 years after I started with Ramada and 30 years ago as of January, 2020. I was the only employee for quite some time until my wife turned on the light in my head by saying, “Do you realize how many millions of dollars you have been making for your clients?” She said, “Why don’t we buy a hotel?” I replied, “With what money?” We put our heads together and came up with a list of relatives who might have $50,000 to invest. This was January of 1997. I found an owner of a beat up 52-room motel near the beach and offered him $2M for his hotel. His property was run by staff that took the easy way out. Prostitutes and drug dealers would rent the rooms out; they pay cash and require no marketing.
We took over on July 1, 1997. I evicted every guest by slipping a note under their door that essentially said, “We have purchased the Ocean Inn and rates are no longer monthly. Daily rates are $79 (it was $29 at the time) and you are welcome to stay at that price along with a valid credit card and driver’s license.” To put it lightly, they were unhappy, but left. The hotel filled up for two straight months after we deep cleaned all the check outs. I had to pay housekeeping a bit of overtime and had to help out. The turnaround took 2 days of cleaning and by July 3rd it looked like new. On September 2nd, the day after Labor Day, the hotel parking lot was empty. That was a wake-up call that the beach cities location was only a home run during summer—significant marketing would be needed for the fall, winter and spring!
By September 5th, we contacted my friend Lynn Mohrfeld, now President and CEO of the California Hotel & Lodging Association who was with WorldRes, a company that provided real time electronic reservations. Yes, it was 1997 and by the end of the year, our 52 unit “boutique hotel” – yeah, right, it was a glorified motel, was 2nd in San Diego County in online reservations. First was the Hotel Del Coronado, with 692 rooms at the time! My wife had worked reservations for Holiday Inn, so she handled all reservations. She was tech-savvy enough to create an electronic newsletter (we still use the format today) and she handled the communication with WorldRes. We created “bounce-back” style content and had a frequent guest program. We served a really cool, European-style breakfast designed by one of our investors who I had worked with at Hyatt and Hilton named Jerry Brooks. We eventually hit our budget numbers right on target and in June of 2000 got an unsolicited offer to sell the property.
Our next plan was a decision on the money. Distribute the profits and have everyone take a tax hit or invest via 1031 exchange. We invested in a piece of land found originally by a friend, Bill Canepa, but he rejected it because his business partner preferred something on the water. When my wife, Linda saw the land among 10 other pieces of property we looked at, she said this is it. Today, it is a dual-brand campus of Homewood Suites by Hilton and Hilton Garden Inn. We endured 9/11 when our bank backed out of our construction loan and a fire that burned our Garden Inn to the ground just before opening. There were times during the development when I wondered how many years I would have to work 80 hours per week just to make ends meet. But sometimes it just takes the right partner. Joe Simone joined us as my partner and we are still together—he has his hotels that he continues to build and I went on to build a management company, RAR Hospitality.
This firm was built as an owner-operator but quickly morphed into a strong third-party hotel management company. The first hotel to manage for others was El Cordova Hotel in Coronado. That hotel ran about 45% occupancy in 2009 at a rate of about $150. While we are not quite double those numbers (90% at $300), it is not unrealistic to believe that it will get there soon. Other hotels that we managed along the coast were the Pantai Inn La Jolla and Pacific View Inn Pacific Beach (both were sold at large profits by their respective owners). After those hotels, we added the Lafayette Hotel, Carlsbad Inn by the Sea, Four Points by Sheraton Kearny Mesa, the St. James Hotel and the Keating Hotel.
We came full-circle when we began acquiring hotels in Arizona when the market was at the bottom. The first hotel acquisition was made with a young, former Disney executive named Cameron Lamming. Cameron and I met when he was with Brixton Capital who wanted to acquire what is now the Doubletree Hotel in Phoenix, Arizona. We just hit it off and acquired three more Arizona hotels and began to develop more hotels together. Cameron is now the President of RAR and will lead us forward for the next 30 years while I back off the 80-hour work week and play a bit more golf. We have put together a team that includes some of San Diego’s top hotel talent:
Vikram Sood, Senior Vice President of Operations, Dari DeSousa, Corporate Director of HR, Cindy Park, Corporate Director of Accounting, Frank Bewley, Corporate Director of Revenues, Michael DeJesus, Corporate Director of Marketing, and Sarah Andersen, Corporate Director of Business Development make up a top tier of executives with skills as strong as any in the business. Our managers that support them are rock stars and while the job market makes it tougher, we have a very talented staff throughout the organization.
Today, RAR Hospitality is planning a 30th anniversary event on February 20th, 2020. Our plans for the next 30 years include alliances with firms in the eastern U.S. so that we can effectively grow and scale. My business partner, Cameron is ready to take the lead and I am ready to help grow and scale the company from a business development perspective. I still love our hotels, team members, guests and industry so I will continue to write, speak, do deals and stay highly active. It’s just time to pass the mantle of day-to-day operations to a great team that is ready.