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The key to a successful hotel project: ‘location, location, location’

What it took to build in the shadow of Logan Airport and the lessons all businesses can learn

Dena DiMarzo grew up in East Boston, playing at a big vacant lot just off McClellan Highway, about a mile or so from Logan International Airport.

“When we were kids, we used to sled down both these hills,” she said. “As we got older, it was pretty much a stomping ground for teenagers.”

Where DiMarzo and her neighbors saw a shabby lot that had been empty forever, James J. Karam, founder and president of First Bristol Corp., a real estate development company in Fall River, saw 6.2 acres of opportunity three years ago.

But only if the numbers added up.

In the end, they did. First Bristol built and now owns and operates a new $32 million, 178-room Hilton Garden Inn on the Boardman Street site. This is the story of what it took to get there—from the calculus that went into buying the property and the extensive market, financial, and engineering studies that backed up that decision, to the unique construction challenges, the hiring of new staff, and, finally, the sold-out opening night.

Along the way, there are lessons all businesses, regardless of industry, can benefit from.

The site

Over the last decade, First Bristol has completed seven hotel projects in the region. An eighth is now under construction in Worcester and work on the ninth, in Providence, R.I., is set to begin this summer. The company owns and manages each property and affiliates with two hotel “flags”—Hilton and Marriott.

_31A8835Jim Karam

The firm, started by Karam in the early 1980s, also specializes in office buildings, shopping centers and residential properties and has developed roughly $500 million in high quality projects in the Northeast over the last 35 years. Though they partner with nationally recognized brands like Stop & Shop, Walmart, CVS, and Bank of America, First Bristol is also a family business. Karam’s two sons, James M. and Jeffrey, serve as vice presidents and his daughter, Alyssa, recently joined as an asset analyst.

When a broker initially pitched the land in East Boston to First Bristol in 2013, Karam knew it presented some difficulties—among them a seller who wanted a quick transaction and a site that would be very challenging to build on. First Bristol had to decide if it wanted to buy the land and, if so, what project would best fit the property.

“We did a quick analysis with some of the retail clients that we work with and they defined it as a drive-by site…so it was not a great option. A hotel appeared to be the best option if we could get the costs in line with projections.

“The key ingredient in selecting the right site for a hotel comes back to the basics of real estate: ‘location, location, location.’ In our project in East Boston, it was obviously Logan Airport,” said Karam.

Karam and his veteran team then began an initial checklist:

  • Identify room generators – In this case, the airport was clearly the biggest, but they also looked at nearby institutions and businesses that could pull in guests from the region, the country, or the world.
  • Barriers to entry – There were several, but among them were the seller with the tight timeline, a site that required rapid engineering assessment, excessive settlement of the ground, and a potentially difficult permitting process by the Boston Redevelopment Authority.
  • Construction costs – Due to the booming development market in the city, the price of labor and construction had soared. If those costs could not be controlled, the bottom line wouldn’t work.

Some friction is actually a good thing, said Karam. “We want to be in areas that are difficult to get into. One of the things we don’t want to get into is a situation where anyone can build across the street. A barrier to entry helps to minimize that affect,” he explained.

After weighing all the factors, the decision was made: Buy the property, warts and all. The price: $3.75 million.

Screen Shot 2016-03-09 at 9.27.09 AMThe site, pre-construction

“It’s a former filled-in gas tank site from the 1940s that the government had used,” said Karam. “But we felt we got our arms around it pretty quickly so we decided to take the leap and went forward with it.”

Analysis

Then, the deeper and much broader analysis began.

Karam said, “We highly value the market study to analyze what’s taking place in the market—what is the need in the marketplace, what’s the competition look like, what type of product, what type of flag?

“The more due diligence you can do, the more prudent you are, the less there are opportunities for mistakes,” he said.

Next came the frame of a financial plan, which factored in projected occupancy rates, estimated room rates, and the cost to operate the hotel. “That’s really the basis that gives us net operating income, which will support our debt service and that dictates what we can spend on the project,” said Karam.

First Bristol approached its lender from a position of strength due to its long track record of successfully handling complicated projects and sites, the depth of team experience, the company’s financial strength, a strong market study, and a commitment from Hilton, said Karam. “It all added up to a positive response from our lender,” he said.

The developer knew he had a steady stream of potential guests hustling in and out of Logan terminals every day of the year.

According to the Massachusetts Port Authority, which runs the airport, total annual flights grew by 20,300 between 2010 and 2015—to 372,928. In the same period, the total number of passengers arriving and departing annually jumped by 6 million—to 33.4 million.

12946_Rockland_Week22_Hotel_v2“Logan is a demand generator itself,” said Pat Moscaritolo, president and CEO of the Greater Boston Convention & Visitors Bureau. “The option of a new hotel property with a great room rate with easy access to Boston fills a much-needed niche in the marketplace.”

Moscaritolo said First Bristol was betting on the hotel at the right time.

The surging Boston hotel market has piled up three consecutive years of record growth in both room night occupancy and room rates, he said. Occupancy rates in this market will remain around 81 percent this year, which he called virtually maximum capacity.

The Convention & Visitors Bureau, citing Pinnacle Advisory Group, said the average hotel room rate for 2016 is projected to increase from $254.10 per night to $275—an all-time high, said Moscaritolo.

12946_Rockland_Week22_Hotel2_v1-1Karam believed he could offer a room averaging significantly less in East Boston, given his model and the amenities the Hilton Garden Inn offered versus the larger, more upscale, and higher amenity houses across downtown Boston.

Next came the part that even Karam—a seasoned developer who not only survived, but also flourished through three major economic downturns—admitted was hairy.

Design and construction

Look all around Boston and what do you see? Construction cranes, the angular symbols of a sizzling construction market in one of America’s hottest cities.

“I think everyone understands that Boston is going through the biggest boom in construction that we’ve experienced in the last five decades,” said Karam. The key element is, ‘What’s the construction cost?’ Dealing in Boston, that was kind of scary.”

First Bristol talked with contractors, subcontractors, and trade unions, pushing them to understand the benefits of finding pricing that worked for all of them. “It took a long time to negotiate,” said Karam. “In the final analysis, we were able to get there.”

_31A8823Blueprints for the hotel’s construction

The developer also had to solve the unique demands the site put on engineering and construction.

Due to the uneven settlement of the top layer of earth, engineers had to come up with an underground geo-pier support system that went through poor soil into a stable base. One thousand columns of stones were vibrated 25-30 feet deep to stabilize the top crust.

The construction team focused on reducing the weight of the building, using lighter gauge framing and thin rather than full bricks to take some pressure off the soil. Together, the two efforts worked – and they were cost effective.

Screen Shot 2016-03-10 at 8.23.34 AMA “before” picture of the Hilton Garden Inn

Construction began in earnest in August 2013. Platoons of hard-hat workers had to be as choreographed as the Boston Ballet to be effective and cost-effective. Progress was steady through fall and into the new year, even with the usual day-to-day problems and the challenges of working in a congested city where heavy traffic can push deliveries hours off schedule. The weather, always a worry in Boston, had been pretty good. “We hadn’t had any snow,” said Karam.

They were just starting to put the roof on and needed about two weeks to finish when the first storm in what would become a historic winter siege arrived. “Then it didn’t stop snowing for the next six or eight weeks,” said Karam.

The sight of tradesmen making union pay hoisting shovels instead of their tools was tough, he added, but it couldn’t be helped. Schedules and workflow changed, a staggering amount of snow was moved and removed, and the crews worked through the weather as best they could.

In the end, the building came together—on time and on budget.

Hiring a staff

When the site work started and the hotel began to rise from the ground, the neighborhood took notice. The moment a trailer was set up to recruit employees, the race was on.

“There were people running to see if they could get a job application,” said Dena DiMarzo, who was hired as a bartender.

Kevin J. Buchanan, a North Shore native and award-winning 20-year industry vet who was working as general manager of the Hilton Garden Inn at T.F. Green Airport in Providence, was brought in early to open the new hotel. His previous experience running an airport hotel was a huge plus. His biggest task was sorting through the 600 applicants he received for 70 jobs.

“The most important quality I look for is someone who smiles,” said Buchanan, whose first job out of college was in a hotel on Route 1 in Saugus. “If you have a natural smile, the technical side I can teach.”

Screen Shot 2016-03-23 at 1.51.21 PMJosephine Ciappina

Josephine Ciappina, an East Boston native, was overjoyed to be hired as a supervisor and hostess by a hotel tucked into her neighborhood. Sixty percent of her co-workers are from Eastie. “This is home, this touches home, its part of our house. I wanted to be part of it,” she said.

Karem said the hiring would make or break the project. “The most important component of a hotel is not the building, it’s the people in the building.”

Opening

August 7, 2015 was just another summer Friday for many people, but not for those on Boardman Street.

“The opening of the hotel is somewhat scary,” admitted Karam. “You think you’re pressing the right buttons, but until the doors open you don’t really know.”

Screen Shot 2016-03-24 at 10.58.04 AMThe lobby of the Hilton Garden Inn

On opening night, the hotel sold every room thanks in large part to an airline that called unexpectedly, urgently needing to house passengers from a cancelled flight. The next morning, the brand new kitchen staff fed several hundred guests during its first-ever breakfast service.

Buchanan said there are several key ingredients to successfully opening and running a hotel. The most important is fun.

“One of the greatest challenges of managing a hotel is motivation of the team members. I want people to come to work and have fun. People who have fun at work create a positive work environment, and the guests can see that,” he said.

The second ingredient, Buchanan said, is empathy.

“Picture yourself on an airplane stuck on a runway for a couple of hours, or being at the airport all day long, and just show that empathy with our guests,” he tells his employees.

It’s a message the staff gets—and delivers—to guests at every touch point.

Screen Shot 2016-03-25 at 1.23.54 PMAnthony Santostefano

“I love driving, talk to people, meet a lot of nice people,” said Anthony “Tony” Santostefano, a shuttle van driver who estimates he has driven about 1,000 people to and from the airport and the Blue Line stop since the place opened.

“When we pick them up, they’re so happy to see us. They had a long trip, they want to get back to the hotel and relax,” said Santostefano, an East Boston resident, too—for 60 years.

Today, almost eight months into its first year, the room occupancy rate is running ahead of the Boston market average and the hotel is seeing solid, competitive room rates, according to Karam.

“When the hotel starts off with a great start as we did in East Boston, you realize all the hard work by a diverse group of professionals really all came together,” he said. “I’m thrilled it came out the way it did.”

Lessons learned and some advice

Reflecting on the hotel project and his career, Karam offered this advice:

Find a mentor

He credits his two older brothers, Tom and Bob, for being great mentors. Karam also found mentors during his early careers in banking, real estate, and insurance. He said you need “examples of how other people do it. Some may be examples of what you don’t want to do, and that’s alright, too.”

Be ready for setbacks

“You have to know, ‘How do I prepare for some of the risks I’m taking?’ Sometimes, there are things beyond your control and you have to be ready to absorb the blows. Hope for the best, but you better prepare for the worst.”

Share your success in every way

“Many times when you run a company and you have some successes, you tend to look back and think it’s all about you. But it’s really about the team…You need to share the success and share the celebrations of the success and share the rewards of the success. I think that is what kept people in my organization for 25 or 30 years.”

This content was produced by Boston Globe Media's BG BrandLab in collaboration with the advertiser. The news and editorial departments of The Boston Globe had no role in its production or display.