By Sam Waltz
TKo Hospitality, a Newport-based firm, this spring launched its hospitality management company, with 130 hotel rooms under management and aspirations to grow to 1,000 managed rooms in just a year or two. Its goal is to become a regional player in hotel and restaurant management.
E. Thomas Harvey III and Vince DiFonzo, two of the three venture partners, are well known in Delaware, and the third, Kostas Kalogeropoulos, has worked in Delaware for years from his Bethlehem, Pa., home in the Lehigh Valley.
Like the utility deregulation trend of two decades ago — separating energy generation and production, long-lines transmission, and retail delivery, with companies built around the core competencies of each — a similar trend is growing in the lodging industry, Harvey said.
Today the hospitality industry is seeing increased separation of capital ownership of assets, retail branding — often franchised — for marketing, and management and operations, as the hotel industry booms to levels not seen in decades.
Harvey is the founder and chairman of the TKo firm, with Kalogeropoulos serving as its CEO and president, and DiFonzo serving as COO.
Both DiFonzo and Kostas come to TKo from Meyer Jabara Hotels, a family-owned hotel ownership and management group founded in 1977, which Kostas helped lead for 35 years and for which DiFonzo worked 23 years, most recently as VP of operations. Meyer Jabara headquartered DiFonzo at the Wilmington Hilton at Christiana, where he helped run its hotels across 10 states.
Harvey is the third-generation operator of Harvey & Harvey Waste Management, sold more than a decade ago into an industry roll-up, USA Waste, which subsequently was acquired by Waste Management. Harvey remained for some years with USA Waste, also joining Thomas J. Hanna, a family member, in 1998 to form Harvey Hanna and Associates, a real estate development and management company.
TKo’s website, www.TKoHospitalityMgmt.com, calls TKo “an affiliate of Harvey Hanna and Associates” and says TKo is “a specialized hospitality management company that develops true partnerships with our clients while delivering exceptional results in terms of profitability, market share, guest satisfaction and increased asset value. We tailor our services for the specific needs of each owner based on market conditions, operational performance and ownership goals.”
“The reaction of friends (is that the change) has been shocking (to them),” said DiFonzo, of his career move to a partnership in TKo. “I had a great job. A lot of people are excited for me. A lot of this is the excitement with our partnership. Given our three skill sets, we make a great team.”
“The health of the hospitality and lodging industry is great,” said DiFonzo. “We have recovered from our downtown, and the outlook is good over the next three or four years.”
DiFonzo has been among Delaware’s most active hospitality leaders, serving as chairman of the Delaware Hotel and Lodging Association; president of the Society da Vinci; and a member of the board of directors of the Maryland Hotel and Lodging Association, the Greater Wilmington Convention and Visitors Bureau, the DE State Tourism Advisory Board, the New Castle
County Chamber of Commerce, the Christiana Rotary Club, and the Delta Outreach and Education Center. He is a West Virginia University grad and a native of the Pittsburgh area.
To DiFonzo’s point, industry data show that national occupancy rates are expected to hit a three-decade high next year, given that demand has increased almost 5 percent and supply by less than 1 percent in the last year. Hotel room prices are increasing as a result, and average room rates have increased to $115 from $97.
Given such demand, and coupled with the low cost of capital, almost a half million new hotel rooms are now slated to come online, with 130,000 of them under construction now and more than 300,000 on the drawing boards or further along.
The so-called lifestyle hotels have been the growth segment as many of the bigger chains work hard to look smaller than they really are to appeal to the millennials, according to the industry. The world’s 10 largest hotel chains now offer 113 hotel brands, 31 of which did not exist a decade ago.
The Hyatt chain has the Hyatt Regency, the Park Hyatt, the Grand Hyatt, the Hyatt House, the Hyatt Place, and, coming soon, the Hyatt Centric.
A 108-room Hyatt Place that opened in 2013 is the first property under management by TKo, having been built recently by Harvey’s Dewey Beach Enterprises at the site of the former Ruddertowne complex. Another 22 hotel rooms are being added. With 16 condominiums already under roof there, another 10 condos are being built as well.
In just the past year, Marriott International launched Moxy, the Hilton Worldwide created Canopy, the Best Western launched Vib, and Holiday Inn-owner InterContinental purchased Kimpton, a boutique hotel chain.
Hotel companies do not typically build, own, or even operate their own hotels — except perhaps for flagship properties. Instead, they build value in their brands, reservations and loyalty systems, and collect franchise and management fees for the hotels they actually operate.
Harvey said TKo’s prospective projects include five new hotels, some in a resort area of Maryland, with other hotels in the Lehigh Valley, but nondisclosure agreements limit what can be said at present.
“At the same time, we’re working to acquire third-party management contracts with other existing hotels,” he added.
“We need to get to Washington, D.C., and New York,” added DiFonzo, identifying the regional footprint that TKo aspires to serve. “I think we’d like to get 15 to 20 hotels in our portfolio in the next half-dozen years.”
Also under TKo management is the Lighthouse Cove Restaurant, the Que Pasa?, and the Bay Center, all in Dewey Beach. ♦
The Associated Press contributed to this report.