Peak Performance
Ben Szobody
Staff

Pinnacle Hospitality proceeds with growth plan, despite hotel glut, economic and terrorist jitters

By Ben Szobody

Business Writer

bszobody@greenvillenews.com

Nearly two weeks removed from New York City's terrorist attacks and the accompanying drop in business travel, Sam Shanbhag's Roebuck-based hotel group has downshifted fiscally.

But he refuses to discard his aggressive development plans.

His Pinnacle Hospitality Inc. is delaying for the moment any hotel ribbon-cuttings, even though it has some properties almost ready to come on line, and Suresh Mathur, his executive vice president, talks about executing a "survival strategy."

Still, the two Indian-American executives aren't daunted.

"I'm not going to slow down," Shanbhag said. "That would give a signal that we are bending to what has happened in New York."

Even before the World Trade Center and part of the Pentagon was destroyed, a sluggish economy and the prospect of slumping convention business from the Palmetto Expo Center couldn't dissuade Pinnacle from its aggressive development schedule - its new Holiday Inn Express on Woodruff Road is four months old, and three others in the area are under development.

"We are Americans by choice," Shanbhag said. "As foreigners, we are different and we need to go one step extra." For Shanbhag and Mathur, that means carrying on with assertive expansion plans and donating money through the Hindu Temple of Spartanburg.

Pinnacle's four local hotels are also working with the Fallen Heroes Disaster Relief Fund in Greenville for charitable causes.

Shanbhag explains that as a 1974 immigrant from India, he is more accustomed to periodic violence and taking business risks when others wouldn't dare.

Brought up in his family's restaurant business in Bombay, India, and trained as an engineer in the United States, Shanbhag made his first foray into hotels in 1991, with the Days Inn in Duncan.

When Mathur came on board in 1999, it was official - Pinnacle was an LLC hospitality business. It now has four hotels in operation, four under development and five others under management contract for other owners.

Mathur's 30 years in the hospitality business started at the Oberoi Hotel School in New Delhi, India, and took him through Cornell University. With Pinnacle, his venue stretches from Greenville east to Myrtle Beach and Richmond, Va.

Pinnacle's combination of existing and brand-new hotels have seen a combined 50 percent occupancy rate in recent months, Mathur said, but he insists the numbers are still rising. Average occupancy for all 73 Greenville-area hotel properties in July was 59 percent, according to Smith Travel Research.

Said Mathur, "The risks have been evaluated, and still we are moving ahead. We should be able to maintain if not improve our market share. These are long-term investments."

Despite iits focus on hotels, Pinnacle has other lines of development, including five local restaurants, the Prime Square retail shopping center on Woodruff Road, the Parkway Plaza office building next to the Michelin North America headquarters, and Hindu temples in Greenville and Spartanburg.

Still, Shanbhag said, "I'm just a drop in a big sea" of business, with no power over whether the economy slips in or out of recession.

All he can do is keep his own program going forward - his plans include building two new hotels in Spartanburg, one in Greenville and another in Charlotte.

Shanbhag's confidence, given the times, is founded on Pinnacle's four-rule strategy. The firm relies on prime locations and good brands, Mathur said - Hilton, Bass and Marriott hotels are its top three choices for future development. Quality management and financial feasibility are also part of the criteria.

So far, three Greenville sites have fit the bill: the Holiday Inn Express and Microtel Inn & Suites on Woodruff Road, and the Homewood Suites by Hilton under development at the Parkway Plaza office building along Interstate 85.

But development isn't everything.

"I'm a land guy - they don't make that anymore," Shanbhag says with a laugh. "So just buy it and sit on it."

Mathur said Pinnacle is already positioned well for the day when it runs out of development opportunities locally - Shanbhag owns nearly 200 acres in small tracts throughout the Carolinas and Virginia.

Many of the now-empty lots will eventually become hotels, restaurants, shopping strips or condos.

Rowena Buffett Timms, vice president for sales at the Greater Greenville Convention and Visitors Bureau, said Mathur has been "very proactive in his search for new business."

As the Holiday Inn Express on Woodruff was being developed, Mathur met with Timms in a construction trailer to ask advice on the layout of his newest hotel. His market research and upbeat attitude impressed her, as well as the quality of the development.

"They've done some things that prove to me they're very aggressively committed to finding new ways of filling their product," she said. "This is a market with a tremendous amount of competition. They're refreshing and aggressive. They're undaunted they just keep moving forward."

Mathur and Shanbhag say that's because, in part, anyone who emigrates is a risk-taker by nature.

"Sam constantly tells me, `Suresh, don't worry if the market is soft, we need to go in there. This is not for today,' " Mathur said. "There's a wholehearted commitment to developing in this market."

Shanbhag said, "Our main focus right now is to have 10 to 12 hotels in the next two to three years."

Some other hotel managers in the area question the timing of their plans, given current economic conditions and the Upstate's surplus of hotel rooms.

"It's unbelievable," said Patrick Wilson, general manager of the Embassy Suites on Verdae Boulevard. "I don't know what these developers are thinking, to be honest with you.

His hotel is having the worst September in its eight years, Wilson said, and even before the terrorist attacks, the past summer has brought record low occupancy rates.

But Mathur insists Pinnacle isn't developing blindly, and despite the economic malaise, his hotels can maintain and improve their occupancy rates.

Andrew Cajka, president of Southern Hospitality Group, said that despite the current weaknesses in the local industry, "the long-term potential here is excellent."

"We believe 10 to 12 months from now the travel pattern will be back to normal."

Shanbhag was a relatively late arrival to the hotel world.

With electrical engineering and digital electronics degrees from Bombay University and North Carolina State University, he has run DC Motors and Controls in Roebuck since 1976 and owned the engineering firm outright since 1980.

He's also founder and director of First South Bank in Spartanburg, and was involved in his family's Bombay restaurant business that dates back to 1910.

But land investments had always been his hobby, he said, invoking the memory of another local real estate hobbyist and Shanbhag's friend, the late John D. Hollingsworth.

Shanbhag opened his first hotel in Duncan in 1991 Pinnacle became an LLC in 1999 and now has a management team of seven.

Staffs of 20 to 50 employees run Pinnacle's hotels and restaurants, bringing the company's payroll to 250 to 300 people.

When describing why he joined up with Shanbhag, Mathur speaks of his boss's seven-day-a-week work ethic, the loyalty of his 17- and 18-year employees and Shanbhag's deep religious beliefs.

"This guy has his god is front of him all the time," Mathur said. In the corner of Shanbhag's office is a glass-covered case filled with Hindu icons and a replica of the Bhagavad Gita. "He will not sign a contract on any day but a Monday or a Thursday," Mathur said.

Both are Hindu auspicious days for Shanbhag, and he insists he won't make a major business decision without the blessings of his gods, to whom he attributes his success and his long-term outlook.

"We are looking long term, not today, yesterday or tomorrow," Shanbhag said. "We always keep momentum - you need to keep development going."

Cutline: Owen Riley Jr./Staff

Undaunted growth: Pinnacle Hospitality's newest hotel on Woodruff Road has been used as a prototype development by Holiday Inn. Suresh Mathur, left, and Sam Shanbhag are developing four other hotels in the Upstate, despite the economic slump.

Cutline: OWEN RILEY JR. / Staff

Involved in the details: Sam Shanbhag finds time to vacuum rooms and mop floors while running Pinnacle Hospitality and his several other, non-hospitality industry businesses.

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Copyright 2006 The Greenville News.