Seeking New Horizons at Dunfey Hotels

by John Milne

Business NH, May 1984

There used to be a lunch counter at Lamies Tavern, the tiny (32 room) mother church of the Dunfey hotel chain. It was paneled in wood and offered food and coffee to the Hampton residents who habitually ate there. One of the stools was broken; it rocked and it was hard to sit on. When a patron pointed this out, the polite reply was that it was the way one of the regulars liked it.

The stool - in fact the whole lunch counter - disappeared early last month, replaced by a cooper-covered bar with an Irish name. T. J. Patrick's will have a band and lots of room for dancing and whatever else young singles do these days. It's a far cry from the moribund restaurant that the Dunfey family picked up 30 years ago.

"New energy," says Jon Canas, president and CEO of the international hotel corporation that may be the largest tourist-related business in New Hampshire. "It's exciting."

Canas, standing before the reception desk at Lamie's, suddenly notices an open door. He frowns, then quietly walks over and closes it. A waitress balancing a tray loaded with plates and full water glasses sees the closing door and Canas at the same time. She blushes.

Canas is the man behind this new energy at the Dunfey hotel chain. A company steeped in old-friend New England atmosphere has acquired a European fussiness, an intense attention to detail. Dunfey Hotels is, in fact, European - it's a wholly owned subsidiary of Aer Lingus, the Irish international airline.

"We had this laid-back, personal New England management style," says William L. Dunfey, one of the family members who is on the hotels' executive committee. "Jon has the sense of fastidiousness, knowing how the flowers have to be arranged [and] by what time in the morning the tables have to be dusted. We started out with this feeling that, well, if it showed, you could dust tomorrow. Jon helped show us that you have to pay careful attention to detail without losing the need to take care of the people.

There's more, Dunfey says. "Above it all [he] is one of the more dynamic marketing executives that you could ever run into."

Canas, aided and encouraged by the Dunfeys, has made the combination of fastidiousness and marketing pay off. "The corporation," says Canas, "has changed very substantially, in size, in scope, and - really - in its composition and nature …. When I joined the company in 1975, the gross at the end of that year was $48 million. And while it had 20 properties at that time, most of them were relatively small. They had an average of about 200 rooms per hotel. And most of them were in New England.

"This year, on an annualized basis, we will be approaching $300 million in sales…. Today, we have 41 hotels in operation and in various stages of construction and development…. They are larger, more substantial hotels. We are now talking about a [rooms-per-hotel] average of 400.

This drive has been capped by the purchase of Omni International Hotels, Ltd., which manages hotels in Atlanta, Miami, and Norfolk, Va. In buying the name and contracts for Omni from Cousins Properties Inc., of Atlanta, and Oppenheimer Hotels Inc., of New York, Dunfey acquired the rights to management contracts for proposed hotels in St. Louis, Detroit, Santa Monica and San Antonio.

This acquisition is the key to the transformation. Dunfey Hotels built its reputation on restoring ailing properties. Omnis are characteristically black-glass-and-chrome hotel complexes located in Sunbelt states.

The negotiations had been under way for more than a year, and company officials say the uncertainty was difficult for some inside the hotel chain.

"We'd be talking with investors, landlords," says the official, "and we wouldn't be able to tell them whether we'd market the property as an Omni class hotel or as a Dunfey classic hotel.

The purchase has required the company to split itself into two operational divisions, each with its own mission and identity under corporate supervision. The fancy, "upscale" hotels now bear the Omni name and are part of an Omni Division. Smaller properties will come under the Dunfey Management Co. Division, which runs hotels and motels in the name of Sheraton and other large franchises as well as the Dunfey name.

Canas describes the reasons for the division in marketing terms. His targets are not only consumers; they're also the owners, developers and bankers who evaluate hotel management firms.

"Anyone who's played Monopoly knows how expensive it is to build hotels, and secure the proper locations." That's why Dunfey originally chose to remodel older hotels - it was cheaper. That market niche is limited and the company was perceived as only a renovator, like an actor who has been type-cast. Today, Canas says, the hotel industry is in a building cycle, and that's not the best place for a firm with the reputation for remodeling.

"It is important...that Dunfey be associated with new hotels as well as with existing older hotels," says Canas.

"Within that context, it was important for us to secure a name and a hotel concept that would be sell-able to hotel developers....The Omni acquisition has achieved that, because people associate the Omni name with upscale, modern, often downtown, hotels and it has a good reputation and a good ring.

"As a result, a number of developers have come to us and now said that the combination of the Omni name and Dunfey management is exactly what we need."

Dunfey management: It's a style worked out by the family and consultant Fred Jervis of Durham, then refined and expanded by Canas. The financial and marketing functions of a hotel are centralized, both to save money and to remove from the manager those responsibilities that have little to do with hospitality. That leaves the manager to concentrate in detail on running a hotel, down to the level of making sure doors aren't left open. The manager's handbook is detailed and specific for given properties in given locations.

For example, Canas says, "We have developed some methods that are monitored with the use of computers to do very intelligent staff planning, according to the volume of sales that a hotel and a restaurant go through. We know it's highly seasonal — it varies not only by season but by weeks of the month and by days of the week and by hours of the day. We have a plan that anticipates the various levels of demand and staffs appropriately, so that the goal is that a hotel never be over-staffed, or understaffed."

Employees — and former employees — of the chain say that the planning process works, in that it forces people to keep an eye on the long-range goal of the organization. However, they say it is demanding, and that the reporting process can take time. The consensus of a series of interviews is that it works if the senior managers of a hotel insist on making it work.

As befits someone who demands careful planning from his managers, Canas seems to have a clear view of the future as he sits in his office, an ultramodern corporate headquarters in a remodeled supermarket building across from Lamie's.

"As we look at the future of the company," he says, "clearly our first task is to expand what is in front of us. The Omni division has got to become fully national in scale by having important hotels in all the major markets of the United States. Unfortunately, a number of those markets are currently overbuilt with hotels. Some further growing has to take place in those markets before we can secure the proper hotel location.

"But we want to be in all the majormarkets of the United States. In order to achieve that, we probably will have to double the number of hotels we're involved within the next five to seven years."

As for the Dunfey Management Co. Division Canas says, "We will expand on an opportunistic basis." The company is looking beyond to other opportunities, too. "One possibility might be the creation of a third division to the company that might include either a group of hotels that would be at the lower level in the marketplace, mid-priced to budget....Another alternative that we have been looking at...has been the possible acquisition of a restaurant chain. We feel that we know a lot about food and beverage, and we feel that we have the knowledge."

The upscaling and expansion of Dunfey Hotels comes as the hospitality industry discovers that the baby boom is beginning to age. The children who made Hula Hoops into a multi-million dollar fad, the teenagers who turned Beatles records into a major British export commodity are now entering middle age. They've developed the habit of travel. Canas feels they will be part of an international travel boom and he wants Dunfey Hotels to capitalize on it.

It is, in a way, singular that a man who has come into what once was a family operation has been able to change its direction. Canas says he was able to achieve the changes with the enthusiastic assistance of Dunfey family members.

"I was very convinced, in my interviews with [Chairman] Jack Dunfey and the other Dunfey brothers, that they had a very real commitment to bringing into the organization what they referred to as professional managers and phasing themselves out of all major management functions to make room, as necessary, for those non-Dunfey personnel..." Canas says.

"Jack was always ahead of schedule, making responsibilities available to non-Dunfeys." Before Canas joined the company, the marketing, personnel and operation functions had already been turned over to non-Dunfeys.

"The process sounds very simple but it is, in fact, quite remarkable for people who have been involved in the control of all of the activities of a company to be willing to move aside and allow others to bring about changes, and be willing to see others commit some errors in the process. Certainly what I witnessed was delegation at its best. Very often the resistance to those changes came from third parties within the organization who [had] been used to a certain thing...and who now may have had some difficulties [accepting] new leadership, particularly when that new leadership was not the former owners."

There's no question of it now. The rickety stool at Lamie's lunch counter has been removed.