Hotel franchises open doors for black entrepreneurs

theGRIO REPORT - In 2001 there was only one branded hotel owned by an African-American. Today there are more than 500 African-American owned hotels...

Luther Vandross was outed as gay after his death.

Over the last decade the hotel industry has made small but significant steps.

In 2001 there was only one branded hotel owned by an African-American. Today there are more than 500 African-American owned hotels.

The biggest push has come from several hotel conglomerates which have launched incentives to encourage minorities to franchise their brand. Hotels, such as Marriott to Hilton to Choice, are spending vast amounts of time and money hiring and educating would-be minority entrepreneurs about the benefits of hotel ownership.

The reason behind this is simple: economics. “The only way our business can grow is through the development of franchises,” says Brian Parker, vice president of Emerging Markets & New Business at Choice Hotels International.

Under the Emerging Markets division, Parker leads a team to recruit African-Americans, Native Americans and Hispanics interested in diversifying their investment portfolios.

The biggest stumbling block for many black entrepreneurs has always been the large capital outlays needed to finance real estate projects. Often they are unable to independently raise the cash and can face resistance from lenders because of their race and relative lack of experience.

“We provide qualified minorities incentives of up to $125,000 to get them started,” says Parker, who is an African-American. Successful candidates will become owners of one of Choice’s ten franchise brands, such as Clarion, Quality, Comfort Suites and Comfort Inn.

There have always been black-owned and operated hotels for African-American travelers who were unable to stay in segregated hotels in the 1960s, says black multimillionaire Mike Roberts, who, with his brother Steve, opened his first branded hotel in 2003 and now owns 12 hotels in the United States.

Lenders, though, are more likely to see franchise ownership as a safer option, says Roberts. “Banks are typically more willing to lend money to established brand names and franchises. It makes them feel more secure,” he said.

“The vast majority of these 500 or so African-American owned hotels are franchise brands. Entrepreneurs are highly unlikely to get funding from banks to acquire or build independent hotels,” Parker adds.

The establishment of the National Association of Black Hotel Owners, Operators & Developers (NABHOOD) has also been instrumental in the drive to increase black hotel ownership. Set up in 2001, NABHOOD, is the professional mouthpiece to negotiate with the big brands and teach African-Americans to become hotel owners or investors, says Andy Ingraham, NABHOOD’s CEO & President.

Ingraham says NABHOOD has a number of strategies in place to accelerate ownership, from their yearly summit where attendees get the chance to close deals to meetings with high-net-worth individuals to diversify their portfolios into real estate.With colleges offering hospitality as a major, more students are becoming interested as well as educated in this field of employment. In fact, Ingraham says educating the young is an important part of the NABHOOD’s mission. They give seminars to students on hospitality courses at historically black colleges and also provide scholarships and internships for those looking to work in the industry, says Ingraham.

But it is not just about the ability to own assets, says Ingraham. “It’s the capacity to impact change and increase executive and minority positions for African-Americans and other under-represented minorities.”

“When you walk into the Crown Plaza Hotel in Atlanta you have no idea it’s owned by an African-American. It’s a branded name and customers expect a certain level of consistency,” says Ingraham. “The difference is you see African-Americans in key positions and it’s the ability for minorities to move up the executive chain.”

Acquisitions of real estate by wealthy African-Americans such as Robert Johnson, Hank Thomas and Mike Roberts, have also put the hotel and hospitality industry in the spotlight.

“There are many similarities between the entertainment and hospitality industry, which is one of the main reasons that owning and managing hotels appealed to me,” says Sheila Johnson, CEO and founder of Salamander Hotels & Resorts. “I consider my career in the hospitality industry as the third act in my life, after teaching and my time at BET, and it has been very extremely enjoyable.”

Despite the increase in black hotel ownership the numbers are still relatively small. There are about 48,000 hotels in North America. Of these 47 percent are owned by Asians, mainly Indian Asians, whereas African-Americans still own less than 1 percent.

“The growth would have been greater if not for the economic downturn,” concedes Roberts.

But there is plenty of room for optimism. Washington has put the tourism and hospitality industry at the top the agenda, with new initiatives to promote North America as a holiday destination in a bid to revive jobs.

The US economy is still struggling from the effects of the global downturn but Andy Ingraham and Brian Parker both agree the hotel industry is showing signs of a steady recovery from the recession.