Real Insight. Real Estate.

Jan A. deRoos, Ph.D.,
HVS International Professor of Hotel Finance and Real Estate, Cornell University Hotel School

Dr. deRoos, on the faculty of the Cornell University Hotel School since 1988, has devoted his career to hospitality real estate; with a focus on the valuation, financing, development, and operation of lodging, timeshare, and restaurant assets. He holds B.S., M.S., and Ph.D. degrees from Cornell University, all with majors in Hotel Administration.

Dr. deRoos is director of the Hotel School’s Center for Real Estate Finance. A frequent speaker on these topics, Dr. deRoos regularly contributes to lodging industry conferences in the Americas, Europe, and Asia. Prof. deRoos’ current research is focused on three themes; the design and implementation of hotel management contracts and hotel leases, investment returns to lodging properties and supply/demand dynamics of lodging markets.

Prior to his teaching career at Cornell, Prof. deRoos worked extensively in the hospitality industry. Industry experience includes work for the Sheraton Corporation in New York City, an engineering professional. He worked for Remington Hotel Corporation as Director of Engineering, responsible for the engineering operations and renovation planning of the firm’s owned and managed hotel portfolio, and as Senior Project Manager, responsible for the construction of new properties and renovation of existing hotels. During this period, Prof. deRoos was responsible for the construction of Marriott Hotels, Hilton Hotels, and Hampton Inns.

Q: As a company, tell me about the niche you have carved out for yourself and how you feel you are different from the competition. Why do you find this product type more appealing than alternative real estate asset classes?

A: I have the honor of holding a chaired professorship; the HVS Professor of Hotel Finance and Real Estate at Cornell University’s School of Hotel Administration.  My professional goal is to be one of the world’s best educators and researchers regarding lodging and lodging related assets as real estate investments.  I have been at the Cornell Hotel School for 21 years after an 8-year career with Sheraton Corporation and Mariner Corporation (now Ashford Hospitality Trust) as a construction project manager and engineering manager.  I engage in education to undergraduates via the School’s undergraduate Minor in Real Estate, to graduate students in the School’s Master of Management in Hospitality program, Cornell’s Program in Real Estate, and in Cornell’s Johnson MBA program.  I conduct a wide variety of executive education work; in 2008 I launched an on-line Certificate in Hotel Real Estate Investments and Asset Management with designed for executives.  In addition, I teach in face-to-face programs approximately 25 days per year.  The executive education work brings me in contact with a wide variety of industry practitioners and keeps me fresh.

I recently (January 2009) published the 4th edition of “The Negotiation and Administration of Hotel Management Contracts” with co-author Jim Eyster; this work had not been updated since the 3rd edition in 1988.  The book is based on a read of over 400 contracts written since 2000; research on the book has allowed me to have great insight into international hotel management contract practices.

Lastly, I do a limited amount of consulting work – clients include international law firms for litigation support and domestic/internationally based real estate investors seeking a depth of knowledge of hotels as an investment.

Hotels are appealing as an asset class for several reasons:

1. The risk profile of hotels make market timing strategies for ‘deep pocket’ investors particularly appealing.  For example, it is clear to me that many hotels are priced with a ‘negative bubble’ in the current market.  Clear headed investors with a long term vision can engage in a set of buy low-sell high tactics; the key is the sell discipline before the market peaks.
2. Hotels have more strategic options for changes of use than any other income producing real estate class.
3. Hotels are fun to own, certainly much more fun than (say) industrial properties.  Tell your friends you own a warehouse and the response is generally underwhelming.  Tell your friends you own a hotel and the response is very different.
4. The professional management available in the industry from the branded and independent management companies is appealing to investors not wishing to be required to engage in day-to-day management while still participating in value creation and income production.

Q: How has your strategy changed as a result of the credit crisis?  Have you expanded/narrowed your acquisition criteria? If so, to what, and why?

A: In the current crisis it still makes sense to be on the sidelines (as this is written in July 2009).  However, it certainly makes sense to have a set of aspirational assets in mind and to be accumulating the cash necessary to close on transactions as they come to market in the next 6-18 months.  Financing will be difficult; all-cash buyers who will finance later will have a significant advantage.  The current market will undoubtedly present opportunities to purchase portfolios at significant discounts.  I believe that single asset transactions will not be discounted very heavily.

Q: What is your favorite part of your job? Least favorite?

A: The favorite part of my job is the conversation with seasoned professionals discussing the nuances of the various strategies to create wealth and income using their hotels as a platform.

Q: How did you get your start in the business?

A: I got started in education during my college days; I was a teaching assistant for the former dean of the Cornell Hotel School; he was a great teacher and ignited my love of teaching.  I got started in hospitality as a 14-year old dishwasher in at the best restaurant in Owego, NY.  In my three years there, I was eventually promoted to line cook on the weekend shifts; I was making $10 an hour in 1970, a large sum for a 17 year old.  I enjoyed the work, the pace, the owners.  This job convinced me to apply to the Hotel School – I was frankly surprised that I was accepted, it must have been the experience, given my high-school academic record.

Q: What three adjectives would you use to best describe yourself as a business person?

A: Three adjectives that describe me as an educator – thorough, quantitative, engaging.

Q: Who is the person in commercial real estate you most admire?  Why?

A: My hero in commercial real estate is Trammel Crow.  He is the father of what is now Wyndham Hotels and had a large number of hotels as part of his greater Texas real estate holdings.  His particular genius was two-fold; first, he understood modern urban dynamics and took his part in the planning, development, and investment process to build cities.  Contemporary Dallas owes a lot to Mr. Crow’s vision and investment savvy.  Second, he had the ability to hire smart people, give them a piece of sweat equity in the deals they worked on, and get out of the way of the day-to-day operation of his various divisions while still maintaining overall leadership.  The combination of the two is a powerful recipe for wealth creation.

Q: If you weren’t in real estate, what would you be doing with your life?

A: If I weren’t in real estate education, I’d be a furniture maker living in the mountains of North Carolina.

Q: What organizations, charities etc are you a member of? Why are they important to you?

A: I’m a member of AREUEA (American Real Estate and Urban Economics Association), the world’s foremost set of real estate academics.  I’m also a ULI Member; this is the best practitioner organization in real estate.  I give my time to the local area via participation on the city Board of Zoning Appeals and the county Board of Assessment Review; this work provides the reward of knowing that I’m making a positive contribution to the community (in addition to paying significant property taxes).  I give generously to the local United Way and to the local food bank; the needs of low income citizens are hugely under served and these organizations make a huge difference in the local community.

Q: What do your weekend activities include?

A: My weekends are spent with my 10-year old daughter, in the garden, watching Cornell sports – basketball, hockey, and baseball are favorites.

Q: You forgot to pay your real estate taxes for the last ten years and “the man” puts you on death row.  What’s your last meal?

A: My last meal on death row would be a classic French “Moules & Frites” with a nice glass of white wine.

Q: If you won the $300M mega million jackpot tomorrow, what would you do with your life? The money?

A: With $300M I’d give most away to various charities, walk around the world while I still can, and then buy that cabin in North Carolina with a nice workshop to make furniture.

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