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E.J. Del Monte expands with new ventures

Rochester Business Journal
June 20, 2014

“We want to do wholly owned projects,” President Alexander Del Monte says. “And we want to start managing third-party hotels (for) people who own hotels but don’t manage it themselves.” (Photo by Kimberly McKinzie)

Work is to begin soon on E.J. Del Monte Corp.’s first out-of-state hotel, in suburban Pittsburgh, and an upcoming hotel project in Albany will be the company’s first joint venture.

“We’re pretty close to finalizing a deal in Albany,” said Alexander Del Monte, the firm’s 28-year-old president and grandson of founder Ernest Del Monte Sr., who died two years ago.

The DelMonte Hotel Group is negotiating with an office development company in Albany that owns two parcels and is looking for a partner with hotel expertise, Del Monte said.

“We’ll be taking a smaller stake in those developments once we finalize that deal and will be building two brand-new properties in Albany, where we have two Courtyards already,” he said.

“It will be a good opportunity for us to build out a market instead of just putting one hotel here and one hotel there.”

The company, which is based in East Rochester, hopes to begin site work for one of the Albany hotels by the end of this year, with construction starting in early 2015, Del Monte said.

Site work for the second hotel there will begin in early 2015, with construction to start later next year.

The Pittsburgh hotel will be a Hilton Garden Inn. The hotel group also is beginning work on a 136-room Hilton Garden Inn as part of the College Town development near the University of Rochester.

“They’re quite different,” Del Monte said of the two Hiltons, which will be wholly owned entities. “The one in Rochester is an urban design. It’s non-prototypical.

“All Marriott hotel chains have a prototypical design for their specific brands. But because we have an urban location, we went a more unique route with our Hilton Garden Inn there. It has no rooms on the first floor. It’s big meeting space, a big restaurant, much more of a full-service feel.”

The company chose Hilton Garden Inn for College Town because its Courtyard hotel in Brighton is nearby, CEO Ernest Del Monte Jr. said.

“The Hilton Garden Inn brand fit the general requirements for the project, and the brand lacked a presence in the market,” Del Monte Jr. said. “That, topped with our long-standing desire to add Hilton products to our portfolio, made it a natural choice.”

The College Town hotel, scheduled to open next May, is to have an Italian-themed restaurant.

“We haven’t decided on a name yet, but we have a pizza oven in there,” Alexander Del Monte said. “We’re going to be going more towards a healthy Italian style.”

The Pittsburgh hotel, slated to open by July 2015, will have a prototypical American grill, as dictated by Hilton Garden Inn, he added.

“We’re probably going to shy away from some of the small markets we are in currently and start focusing on some of the larger ones—like Pittsburgh, Rochester and Albany—something that has multiple demand generators,” he said.

“It’s really important for us to have a diversified customer base.”

Pittsburgh fits that criterion, Del Monte said.

“It’s a booming city,” he said. “They’ve got energy, technology, hospitals. It’s an incredible success story. We’re excited to be in that market.”

The 118-room Hilton Garden Inn will be in Robinson Township, 12 miles west of Pittsburgh.

“It’s a departure for Del Monte hotels, and it may result in an acceleration of their growth,” said George Conboy, president of Brighton Securities Corp.

“Del Monte has always been conservatively run and has kept expansion to a fairly tight geographic range. That’s the hallmark of a conservative, family-run firm that wants to make sure they can control every aspect of their operation.”

Growth in the Albany region has been spurred by nanotechnology, including the SUNY College of Nanoscale Science and Engineering. The college employs 3,100 people and has attracted high-tech investments totaling $20 billion since its inception in 2004.

Nanotechnology has created 10,000 jobs in the Albany area in the last five years and is expected to add 5,000 more in the next two years, Del Monte said.

In Malta, 25 miles north of Albany, Globalfoundries Inc. has built a $20 million microchip plant and is thinking about building a second one, Del Monte said.

“The amount of economic activity there justifies the new hotels,” he said.

Growing portfolio
The DelMonte Hotel Group includes 17 hotels, nine of which are in the Rochester market, and 1,600 total rooms as part of its Marriott International Inc. portfolio. The group employs 850 people.

The nine local hotels include the Renaissance Del Monte Lodge Hotel and Spa in Pittsford, the Rochester Marriott Airport Hotel, four Fairfield Inn & Suites, two Courtyards and a Residence Inn. The Hilton at College Town will be Del Monte’s 10th locally.

The group has two Courtyard hotels in Albany, a Courtyard and a Fairfield Inn in Binghamton, one Courtyard each in Buffalo, Ithaca and Newburgh, and a Fairfield Inn in Corning.

“What’s new for us is we’re looking actively to take partners on in deals,” Del Monte said of the Albany initiative.

“We bring a lot to the table. We bring Marriott (and) Hilton to the table. We’re approved managers for both of those brands. My grandfather built his first Marriott hotel when, I believe, there were 13 Marriott hotels in the country.”

E.J. Del Monte Corp. was founded in 1955—two years before Marriott transformed itself to a hotelier from food services—as a maker of aircraft missile generators by Ernest Del Monte Sr., a U.S. Air Force veteran who loved to fly.

Del Monte sold the aircraft business to a California-based air research firm in 1958 and leased the Linden Avenue factory to it. He bought land around the building and as a real estate developer built factories for several area companies, including Bausch & Lomb Inc. and Xerox Corp.

Del Monte began thinking about building a hotel in the 1960s, but conventional construction was cost-prohibitive for the family-owned business. Instead, he created the patented Delcrete Building System of pre-cast concrete rooms.

“It’s prefabricated concrete rooms that you stack on one another and connect them together,” Alexander Del Monte said.

The concept enabled Del Monte to build its first hotel, the Rochester Marriott Thruway Hotel, in Henrietta in 1974. The company sold that hotel to Rochester Institute of Technology in 2001.

Ernest Del Monte died April 21, 2012. His son, Ernest Jr., who is known as John, replaced him as president and CEO. He and his three sisters own the company.

The company declined to disclose financial details of its operations.

“My father grew the company from two hotels to where we are today, and we’ve done that all with family money,” Alexander said. “Now, with our expansion plans, we’re not going to be able to do it just on our own.”

In addition to joint ventures like the Albany project, the company is looking for institutional investors, said Del Monte, who joined the family business in July 2012—three months after his grandfather’s death—after three years as a loan underwriter for M&T Bank Corp. in New York City.

“We want to do wholly owned projects,” he said. “And we want to start managing third-party hotels (for) people who own hotels but don’t manage it themselves.”

The strategy makes sense, Conboy said.

“When you expand, when you take on joint-venture partners, when you seek outside financing, you increase the risks,” he said. “You increase the potential for return and growth, not unreasonably.

“They have a demonstrated history of quality operations. It’s a perfectly normal step that they should seek to expand outside their original comfort zone and seek other growth opportunities.”

The company is focusing on the Northeast and territory as far west as Chicago and as far south as Atlanta, Del Monte said.

“We want to be able to get to our hotel within a direct flight out of Rochester or within a five-hour drive,” he said.

“We would drive a little farther if we had a cluster. We will take two flights to get to a property if we have three or four properties in the location. In Pittsburgh, our goal is to have four or five hotels within the next four years.”

6/20/14 (c) 2014 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email service@rbj.net.





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