Hotel Industry Pioneer Jack DeBoer

Business Jet Traveler » April 2010
“He called and said, ‘If you don’t pay me by Friday, I’ll kill you.’ I had 8,
Thursday, April 1, 2010 - 5:00am

A sign in Jack DeBoer's office reads, "Success is seldom permanent. Neither is failure." DeBoer has seen plenty of both in his long career but his spectacular wins have been sufficient to eclipse his losses. Business-minded since childhood, he began selling real estate while still in high school in Kalamazoo, Mich., and has been an entrepreneur ever since. "I've never worked for anybody except for when I was in the Army," he told us when we met recently at New York City's Waldorf-Astoria hotel.

Early on, DeBoer teamed with his father to construct single-family homes in southern Michigan. Then he entered the apartment business and built more than 16,000 units in 25 states, becoming the country's second-largest multifamily developer.

But DeBoer really hit his stride when he moved into the hospitality industry and helped to pioneer the all-suite hotel concept. He built the first Residence Inn in 1975, expanded the business into a 100-hotel chain and sold it to Marriott in 1987. A year later, he co-founded the Summerfield Hotel Corporation, which Hyatt subsequently bought. And in 1995, he launched Candlewood Hotel Corporation, which he sold to InterContinental after amassing 130 properties.

DeBoer is now 79, but the idea of slowing down apparently hasn't occurred to him. He founded the extended-stay hotel chain ValuePlace in 2003 and still runs the fast-growing operation, which now has more than 160 locations (about 45 company owned and the rest franchised). "We are equal in operating results to a year ago in an industry that's down 20 to 25 percent," said DeBoer, who uses a fleet of six business aircraft to help him oversee the coast-to-coast, 29-state chain.

You've had some huge successes but I've read that most of the 30 or so companies you've started have failed.

I've never had a bankruptcy, never been foreclosed on in a loan, but I've lost lots of money trying to do things that I didn't know how to do. If you get successful in your own business, it's easy to think you can do it in somebody else's and generally you can't.

And at some point you decided to stick with what you know?

That's exactly right. I do have a manufacturing company that I've owned for 20 years, but I have a great partner. If I were running it, it would be another failure, but it's successful because he knows what he's doing.

Speaking of failures, you turned down $100 million for your apartment-building company and a year later the business fell apart. What happened?

I built 16,000 apartments, so I thought I could walk on water and I got overextended. It took me seven years to unwind it. I lost all the business money and started over.

I read that somebody threatened to kill you during this period if you didn't pay a debt. Did that really happen?

It did. He called me up and said, "If you don't pay me by Friday, I'll kill you." I had 8,000 creditors at that time, so I said, "Who is this? How much do I owe you?" He said, "Friday" and hung up.

I'm guessing you repaid him since you're here.

Yeah, everybody got paid.

How did you make a comeback?

It was a case of changing personality as much as anything. You know, a successful entrepreneur can get pretty arrogant. I was one who always thought I was right. And it got me in trouble with the company. So now I listen to other people and I read about how to run companies. I never did that before.

You've emphasized in your speeches that success and failure are both fleeting.

Everybody fails but you've got to pick yourself up and you've got to build certain things into your life to help you when you do fail. Like, you have to be honest. If you're honest, it's pretty easy to face the world to rebuild. If you fail because of dishonesty, you got what's coming to you. And rebuilding out of that is basically impossible.

When you rebuilt, it was with Residence Inn. What gave you the idea to create all-suite hotels?

The transition to Residence Inn from the apartment business was pretty logical. Apartments weren't making money and I thought if I could build an apartment that

I could sell like a hotel, it would work. And it did.

You ultimately developed and then sold the Residence Inn, Summerfield and Candlewood chains. Why didn't you just stick with one of them and keep expanding it rather than sell and start over?

The buyers thought the businesses were worth more than I did-and they were right.

Now you've got ValuePlace, which charges as little as $170 for a week's stay in Phoenix. How do you keep prices so low?

We were able to figure out how to deliver to the customer everything that everybody uses and eliminate the things that everybody does not use. We don't have swimming pools, meeting rooms or fancy stuff in the bathrooms and we don't do free breakfast.

But other budget hotel chains also don't have those things and aren't quite as inexpensive.

Yes, but in the hotel industry the average stay is less than two days. We are a minimum of seven days. That eliminates the churn in the front office and turns over the rooms much slower. So the operating model is driven to a great degree by the fact that we don't sell by the day.

When you interview someone for an executive position in your organization, do you have a favorite question that produces particularly revealing answers?

I don't talk much about their ability to do the job.

I talk a lot about who they are and how they think. "Do you have many friends? Will you keep track of them when you move to this town?" If they say, "Well, I can always get new friends," I shut down. I can teach a person how to run the business. I can't teach him to be a good human being.

So friends and family are very important to you?

I've been married 56 years to the same woman, but I just got lucky. When I was building my apartments company, for a long time I was gone a lot, and one day my kids were grown up.

Do you think you could have been as successful as you've been if you'd spent more time with family?

Absolutely. I have a group of men that I've skied with for more than 50 years and we all have sons. And these young men are better fathers than we ever were. I never changed a diaper. That wasn't my job. Our sons have a balance in their lives that's much better than people my age ever had. They're successful but they have a balance. I thought about business every hour and I still think about it a lot but now I know who my kids are and who my grandchildren are and I spend time with them.

How would you describe your management style?

I'm a lousy day-to-day manager. I don't think any entrepreneurs are good managers. I can read a financial statement, but I hire people who run the business day to day. I'm in too much of a hurry to be a good manager whereas the guy who runs our hotel group-he'll take an hour for a meeting that I would do standing up.

You've said you didn't want to be second largest or get $100 million for your company when someone else got the same amount for his. Why was it so important to you to be biggest or number one?

Ego. I didn't want to go to a convention and have someone say, "Jack DeBoer got $100 million, too." But I got over that. I'll take $50 million.

When did you become a pilot?

I wanted to fly my whole life. In the fourth grade, I wrote a paper about how I wanted to be a doctor and fly back and forth in a helicopter between a series of hospitals. I learned to fly in the early 1960s and it's been an important part of my business all these years.

How so?

You can go to one meeting in one state flying commercial or you can have an airplane and go to four meetings in four states in a day. And if you have the motivation to do that, you make more money, you do more deals. It's an incredible business tool.

What did you think when politicians started bashing the business jet industry after the auto CEOs flew their corporate jets to Washington?

I don't think the president or many members of Congress have any idea of the power of what they say. Have they sat down and said, "Look, we're gonna put 300,000 people out of work because of trashing this industry"? They probably would have acted differently. But they didn't think that way. We've got 23,000 people laid off from the aircraft industry in Wichita alone. And everybody still needs airplanes to run their businesses. It's outrageous.

Can you tell me about the round-the-world trip you took in 1988 in your Gulfstream II?

When I sold Residence Inn, the day that Marriott took over I said to my wife, "Let's go explore the world." We hired the best people we could find, took our own guides and went to 39 countries. It was an incredible experience.

I understand that trip led to your involvement with the World Vision charity. How did that come about?

Before the trip, if I'd had to meet my maker and he'd said, "Jack, how did you do?" I would have said, "I did OK. I obeyed my father and mother, I graduated college, I went in the military, I created businesses and I raised a family and paid the bills." After the trip, [I realized that] if I'd had to go to that meeting with my maker, he'd say, "But what did you do for my planet?" Whoops.

So we invited 10 couples to dinner. We said, "We're gonna tell you about a fantastic trip" and then at the end I said, "OK, now you have to pay for your dinner. You have to write us a letter and tell us what you would do next if you were us." We got 10 letters and they all said the same thing: Find something about which you have a passion; don't start anything new; and get involved.

We went to Guatemala and saw how World Vision worked. We were impressed that they weren't going to fix the whole world; they were going to make a difference one child at a time. Today that organization has a $2-billion-a-year budget without an endowment. They raise it every year. They're in 100 countries. They've got 40,000 employees and 100,000 volunteers.

You started working with them in Myanmar?

Yes. Our goal was to make a difference to children because 50 percent of the deaths in Myanmar are children under five and they're dying of malaria and dysentery, both of which you and I can cure by going to the local Walgreens.

Fast-forward 20 years: We've now affected the lives of about two-and-a-half million people. We have 600 employees and about 1,000 volunteers in 22 townships around the country. So we're proud to be involved.

Last question: Two chains you founded—Residence Inn and Candlewood—have locations right near here. So why are you staying at the Waldorf-Astoria?

Good question [laughs]. Actually, I have a better rate here. Residence Inn is $500. It's $400 here.

 

CEO Files Résumé: Jack P. DeBoer

BIRTHDATE: Jan. 15, 1931

POSITIONS: Chairman, Consolidated Holdings, Inc. Oversees ValuePlace chain, which he founded in 2003. Chairman and co-owner of Hix Corp., a manufacturer of printing equipment, gas and electric dryers and machines for the food industry.

PREVIOUS POSITIONS: Built Residence Inn chain starting in 1975; co-founded Summerfield Hotel Corp. in 1988; founded Candlewood Hotel Company in 1995.

EDUCATION: Business degree, 1952, Michigan State University.

PERSONAL: Lives in Wichita with wife Marilyn. Has one son, one daughter and three grandchildren. Active pilot who currently holds three-kilometer world speed record for jet aircraft under 18,000 pounds. Enjoys golf, skiing, snowboarding and boating.

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“"I've got a list of corporations that have gotten out of their airplanes [because of criticism from politicians]. It is the stupidest thing I've ever seen. When you look at the time and cost savings; it does not make sense not to fly [privately]. You can't let public perception interfere with your business decision to fly. It either is a good business decision or it isn't."”

-business aviation entrepreneur Nick Popovich