Search

×

TMC Hospitality’s Bates follows new crowds

Disruption has been the way forward for the past decade for many a maverick in the hotel world, and young entrepreneur Philip Bates’ participation certainly follows that playbook.

Bates’ offshoot of real estate investor and developer TMC Group is called TMC Hospitality, which launched in 2016 with two new brands, Bode and Drift. The group has additionally invested in and/or managed more than US$200 million of hospitality projects.

At the moment, TMC Hospitality has invested in four of its hotels and fully owns two. It has also signed two letters of intent for pure management contracts.

Bode, with two existing locations in Nashville and Chattanooga, Tennessee, has three more properties in the pipeline: Palm Springs, California; Greenville, South Carolina; and Savannah, Georgia. The brand is known for creating flexible spaces that blend the style of vacation rental homes with the comforts and conveniences of a boutique hotel. 

Drift, with a spare and minimalist aesthetic, yet a vibrant and friendly demeanor, has openings in San Jose Del Cabo, Mexico and Santa Barbara, California, with Nashville on the horizon. 

Bates has a background in finance as an acquisitions analyst at Barker Pacific Group and as a senior analyst at Colony. Shortly thereafter, he joined TMC America where he became their vice president of investments from 2012-2014, leading seven equity investments into development projects.

HOTELS recently interviewed Co-Founder and CEO Bates, who partners with his brother David, to learn more about TMC Hospitality and get his take on the current state of hotel affairs.

“The reason for this trend was simple – travel is better with friends, and the more friends you have, the more rooms you need and no one was truly catering to this market in a satisfactory manner.” – Philip Bates
“The reason for this trend was simple – travel is better with friends, and the more friends you have, the more rooms you need and no one was truly catering to this market in a satisfactory manner.” – Philip Bates

HOTELS: Can you provide more specifics on how TMC Hospitality came together?

Philip Bates: We are avid life-long travelers and experience seekers. We anecdotally noticed a trend several years ago that we, our friends, family and colleagues were increasingly travelling together. In most cases, this meant booking an Airbnb or adjoining hotel rooms to accommodate our party size (3-plus people) and neither experience was optimal. The reason for this trend was simple – travel is better with friends, and the more friends you have, the more rooms you need and no one was truly catering to this market in a satisfactory manner.

We began to research and build data tools to track these travel patterns across the United States. After months of work, we realized that we were witnessing an evolution in hospitality and the emergence of perhaps the biggest blue ocean opportunity in the hotel market since boutique and lifestyle hotels entered the market decades ago. When this became clear to us, we sought to create a hotel platform that caters to this emerging segment with multiple brands at different price points and that was the birth of TMC Hospitality.

H: How is it an off-shoot of TMC Group?

PB: TMC Hospitality is an offshoot of TMC Group in that it was created by (both concept and capital) the executive team of TMC Group.

H: How do you separate responsibilities with your brother, David?

PB: David and I work together really well and organically separate responsibilities based on our respective skill sets and business needs. He actually runs a successful brain health startup now, but is still an active member on the TMCH board.

H: Can you explain how you have invested in and/or managed over US$200 million of hospitality projects?

PB: This number has grown over the last year, but consists of a range of projects from ground up developments to acquisitions and repositions to full asset conversions (i.e. office to hotel). Our hotels are located in California, Tennessee, Georgia and Mexico. We will be opening four hotels over the next 18 months and we are actively looking for more projects in key markets across the United States.

H: You have also invested in more than 30 early-stage startups. Can you elaborate?

PB: These investments were made through the TMC Group venture capital arm, Tamarisc, that my brother David and I started in 2014. It is now managed by a dedicated team, but I remain an entrepreneur in residence and am on the investment committee. We invest in early stage, innovative real estate and real estate-related technology companies.

H: Does TMC Hospitality have investor partners?

PB: We have a range of investor partners from ultra-high-net worth individuals, to institutions, as well as national and local banks.

H: How is the portfolio performing?

PB: The portfolio is performing well, all things considered. We lost very little money in 2020 and are profitable thus far in 2021.

H: How did you manage through COVID and how has it impacted the trajectory of the group?

PB: We never closed and that is largely due to the fact that our technology and operating platform enable us to run our properties with a lean staffing model. We certainly lost money a few months last year, but were able to realize profit in several months. We were also able to work with our lenders for temporary loan modifications and received much benefit from PPP. The year definitely slowed our growth (we only closed one asset), but we were able to strengthen our team and invest in our technology, brand and other verticals to strengthen our platform during very challenging times. 

Courtyard at the Bode in Nashville, Tennessee
Courtyard at the Bode in Nashville, Tennessee

H: Tell us about the state of your development pipeline?

PB: All of our projects ‘survived’ COVID in that we owned or our partners owned our assets under favorable capital structures. That said, three ground-up projects have been delayed due to construction lending markets. We currently have four projects under construction and they will be opening starting in August 2021 through January 2023.

H: How are the Bode and Drift proof of concept holding up and working through COVID?

PB: One of the silver linings about COVID is that both Bode and Drift target market (social groups), technology and operating models were greatly validated during COVID. Direct bookings increased year over year. Our properties outperformed our comp sets significantly and we were able to provide a very COVID-friendly hotel model (contactless check in, in-unit and on property space built for social groups, etc.). 

H: Again, coming out of COVID, how is the TMC Hospitality platform pivoting?

PB: I do not think we are making any major pivots, but are making a lot of minor refinements. We have been able to adjust our property organization charts to be slightly leaner and more guest focused. We also were about to double-down on our growth team and we are anticipating a lot of growth over the next five years. Lastly, we enhanced our brand messaging and technology offering to better cater to social groups during COVID.

H: What were the biggest learns through the past 18 months?

PB: Haha, it feels too soon to be entirely clear on how to answer to this, but I would say a few lessons are:

Stay nimble yet focused. What I mean is that we have to stay flexible and responsive to the market to capitalize on opportunities, yet at the same time be the best in class at what we do. During COVID, we doubled down on all things social groups and that is really starting to pay off for us. That often meant that we had to say ‘no’ to opportunities that seemed promising at the time but were a divergence from our core offering.

Double down on your team. Our team is what enabled us to survive COVID. We have great people and they really showed up when things were most challenging. Everything we have invested in our team has paid dividends and I hope we get better at it in the coming years.

Partner with like-minded people. We weathered very challenging times rather well and that is largely because we have great partners. Great partners are most important in the challenging times, and I am proud that we made it through COVID without losing a deal and with our partner relationships even stronger than before.

H: What is the way forward?

PB: In the near term, we are cautiously optimistic and are staying nimble as opportunities that fit our model arise. We give a lot of thought as to how travel will change post-COVID and hope to position ourselves well for it.

H: What are the biggest opportunities?

PB: Social group hotels in drive-to leisure markets.

H: What are your biggest challenges?

PB: Seller pricing expectations along with general market uncertainty.

Comment