BridgeStreet Accommodations provides today's nomadic business travelers with a
home away from home. Now, through an aggressive acquisitions strategy, the
company's set to corner the international market in interim-housing services.
In 1996, $382 billion was
spent on domestic business and vacation travel, and another $90.4 billion on
international travel, according to the Tourism Works for America Council.
Furthermore, the U.S. Scheduled Airline Industry reports that in 1997, more
than 600 million passengers boarded airplanes in the United States, with
business travel accounting for an average of 40 percent to 50 percent of all
such excursions. These statistics — combined with the fact that even small- to
mid-sized companies opening multiple domestic and international offices and
business consulting projects often running for months at a time — add up to a
strong market for flexible housing. On the forefront of this trend is Solon,
Ohio-based BridgeStreet Accommodations.
BridgeStreet Accommodations has seized
the opportunity created by the nomadic existence of today's business travelers
by providing them with upscale temporary housing services, and as a result, the
company has experienced sales growth of more than 300 percent during the past
year. An aggressive acquisitions effort has fueled BridgeStreet's growth, which
is still going full force as the company endeavors to be the leading — perhaps
the only — provider of these services nationally and, through affiliates,
globally.
The temporary-housing industry has historically been a
fragmented one. Typically, industry players would establish accommodations to
serve a few key corporate clients in the region, but when those clients needed
to conduct business in other cities or relocate employees, an interim-housing
service could do little more than refer the client to another service in that
region.
Why not connect them with another office within your own
company? That’s what five owners of regional temporary-housing services were
thinking in 1996 when they joined forces to establish BridgeStreet
Accommodations, took the company public and set forth on an ambitious growth-by-acquisitions
strategy. The five companies — Temporary Corporate Housing Columbus of
Columbus, Ohio, Corporate Lodgings of Hudson, Ohio, Exclusive Interim
Properties of Baltimore, Home Again of Minneapolis, and Temporary Housing
Experts of Memphis — in their new incarnation acquired regional competitors
until by the summer of 1998, BridgeStreet had gone transcontinental. As of June
1st, 1998, the company had more than 4,000 fully furnished, high-quality apartments,
condominiums and houses under lease in 26 U.S. metropolitan centers, Canada and
the United Kingdom.
In retrospect, the decision to create a large, networked
company to handle national and global extended travel and relocation seems to
border on the obvious — although that’s what retrospect does for most good
ideas. Then and now, the facts were soundly in BridgeStreet’s favor: the market
is rock-solid and only getting stronger. So why hadn’t any of the estimated 400
temporary professional housing services thought to expand their regional reach?
“It’s only recently — with BridgeStreet — that anybody had
the vision to take this on on a national basis,” CEO John Dannenberg says,
noting that success lies in seeing the opportunity and having the courage to
transform it into reality.
Targeting Fortune 2000 companies, business consultants,
professional athletes and artists whose temporary stays range from a few days
to several months, BridgeStreet’s client list includes such prominent
corporations as Procter & Gamble, Ameritech and Goodyear. The company has
made an art of providing comfortable surroundings and support services that
alleviate the regular traveler’s sense of displacement. Typically, Dannenberg
says, BridgeStreet’s one-bedroom units are two to three times larger than the
average hotel room — more than 700 square feet of living space versus about 200
— and tend to cost 40 to 50 percent less than standard or extended-stay hotels.
Some BridgeStreet clients prove to be more challenging, such
as the Hollywood film producer (BridgeStreet declines to identify its customers
to protect their privacy) who needed a house with a stable so she could bring
her horse on location. Then there was a famous couple, both actors, who
required accommodations for their bodyguards and property-surveillance cameras,
and an actress who wanted a place with white walls only, to help her
concentrate.
“Whatever it is they want, we can get it for them,”
explained Rita Pesecky, director of corporate communications.
Dannenberg says BridgeStreet seeks to distinguish itself by
leasing, rather than buying properties and their furnishings. With this
strategy, the company can adjust the quantity and mix of its offerings as
demand and local economies warrant and refresh the decor more frequently than
it otherwise might. In addition, by offering a number of properties in any
single market, BridgeStreet has become synonymous with choice. Where one
customer might want to be in an apartment complex with a gym, sauna and
swimming pool, another who is planning to relocate can usually find a property
in the neighborhood where they plan to live and, therefore, get their bearings
in the area, investigate the quality of the school system, and so forth.
Under the leadership of former president and CEO William
Hulett III, BridgeStreet began to establish its brand and gain a presence in
key markets; however, it also encountered lags in demand in some cities and had
to revise its earnings projections. After an initial surge, the company’s directors
determined a new leader was needed to guide the company through its next level
of growth.
Hulett, who had articulated the BridgeStreet vision, has
stayed on as a director and vice chairman but relinquished the role of
president and CEO to Dannenberg, former CEO of three large service companies
including Sonitrol Security, a $40 million division of ADT, Ltd. BridgeStreet’s
accelerated growth had led to a moderate dilution of energies; consequently,
while the corporate vision will remain essentially the same, Dannenberg is
charged with helping the company regain its focus and making sure that
BridgeStreet gets as big as it can while maintaining the high quality it has
become known for.
Dannenberg, a self-proclaimed “Jersey boy,” graduated with
honors from Rutgers University, accounting degree in hand, and went on to
develop expertise in shepherding entrepreneurial companies to a more
sophisticated level of operations. As president and CEO of the security
division of Hawley Group Ltd. (predecessor of ADT), for example, he completed
more than 30 acquisitions. BridgeStreet’s directors regard Dannenberg as a
leader who is capable of integrating and operating acquisitions domestically
and internationally. Between his Hawley and Sonitrol presidencies, Dannenberg
was owner and president of Follage Plant Systems, a large commercial plant
sales and services company that was purchased by Rentokil Environmental
Services of the United Kingdom.
Before relocating to the Cleveland area, Dannenberg and his
wife had an opportunity to be BridgeStreet customers. Having “lived the
BridgeStreet experience,” he gained insight into the company’s operations and
found he liked the personal touches like the fruit basket that awaits each
guest, and “the little things” like area maps and local information that can
help orient the traveler.
“There’s a very personal touch,” he says, noting that the
company called shortly after their arrival — as they do with each guest — to
ensure that the accommodations were comfortable. And the housekeeper even left
a note to let them know about the person who would be replacing her during her
vacation. These are signature services that Dannenberg wants to preserve, he
says.
Dannenberg gives the impression of being an open-minded,
buttoned-down leader. He wants to keep the company’s eye trained on providing
top-shelf services to the customer while bringing efficiencies and
profitability into line and remaining accountable to investors. Acquisitions
will be done with the objective of increasing earnings per share, which, as a
public company, is one of BridgeStreet’s main obligations, he says. At 52,
Dannenberg is seasoned enough to know that his management experience in other
service industries is perfectly transferable to the hospitality business and
wise enough to know that he can learn a great deal from his directors and
managers, many of whom have worked in this field for years.
In fact, since joining BridgeStreet three months ago,
Dannenberg has emphasized internal and external communications. At the center
of his strategy are monthly meetings involving regional vice presidents and
frequent teleconferences — an easy and inexpensive way to “put all the brains
together and listen to them. In a half hour, with 10 or 12 managers on the
line, you learn so much,” he says. Marketing communications will also be
bolstered, via a national print-advertising campaign and redesigned collateral,
and to ensure that business information is processed and utilized optimally,
the company will upgrade its information technology, starting with new
accounting systems in every location — a project that is about 50 percent
complete.
“Technology-wise, we’re making a very big investment to get
absolutely state-of-the-art systems that will help us keep growing” and enhance
the level of services provided, Dannenberg says.
The company's 1997 sales
totaled $50.8 million, and figures for the first two quarters of 1998 show a
marked acceleration, with revenues of $44 million. And Dannenberg wants to make
sure the company’s infrastructure will support its growth plans and facilitate
processes for employees, ultimately enabling BridgeStreet to meet or surpass
its goals. While its growth track is ambitious, and the numbers are improving —
the gross margin percentage increased from 22.7 percent in the first quarter of
1998 to 27.6 percent in the second — the company’s plan emphasizes steady,
measured growth to ensure that the properties’ quality and exceptional service
remain at the forefront.
Some more conservative safeguarding measures have to be put
into place to cushion less active periods, Dannenberg says. For instance, he’s
implementing more refined inventory-management techniques, creating flexibility
when negotiating leases, and forecasting with defined metrics. The company is
aiming for a 90 percent occupancy rate, which it hit during the second quarter
of this year, but the industry typically experiences less demand during the
fourth and first quarters (using a calendar fiscal year), when there are fewer
relocations, and the holiday season slows business travel in general. Projects
tend to pick up again in March.
Dannenberg’s management style blends a methodical approach
to planning and process with a penchant for agility and adaptability. So, in
addition to instituting standard (and essential) management controls and
revamping IT systems, Dannenberg brings to the table a key word: listening. He
hopes that his focus on listening to the customer will permeate the company and
continually improve services and that his ability to listen to employees will
similarly improve operations and motivate staff. It’s an inclusive way of
running a business, typified by macro management. In other words, he considers
his colleagues to be capable professionals who want to contribute to the company’s
success. For example, the regional vice presidents are given a great deal of
autonomy, and each one develops a business plan that reflects factors affecting
business development that are unique to their regions.
“I like people to take that responsibility, and it’s more
fun for them,” Dannenberg says. “It’s like they’re running their own little
businesses, but we’re all part of BridgeStreet,” making the organization grow
as a whole, he added.
In a service business, listening to the customer is also of
paramount importance, Dannenberg says. BridgeStreet keeps the lines of
communication open and responds to customer needs — whether someone requires a
crib or a computer, a cosmopolitan townhouse in the heart of a city or a
larger, more remote home with grass and trees around. The company determines
its geographical expansion based on feedback customers provide, as well. Its
next domestic forays will likely be in Boston, Chicago and San Francisco,
ideally by 1999, while internationally, a need for flexible housing in France
and Germany has been expressed, Dannenberg says.
“We have to keep our nose to the grindstone,” Dannenberg
said as the third quarter was nearing its close, and by staying on track,
putting systems in place, relying on employees’ expertise, and continuing to
listen to the customer, “we can be number one in this business on a global
basis,” he says.
For
additional reading on this topic, see M&A Mania: Is It Right for Your
Business?, How to Expand Your Business Globally and Making the
Segue From Stability to Growth.
Company: BridgeStreet Accommodations
URL: www.bridgestreet.com
CEO: John Dannenberg
Industry: Interim housing services
Location: Solon, Ohio
Founded: 1996
Revenues: $44 million (1st and 2nd Q
1998)
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Virtual Advisor,
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