Run out of a tightly packed office in Vancouver’s uptown Broadway corridor, Northland Properties Group operates 45 Sandman Inn hotels, 140 restaurants—including Moxie’s and Denny’s—and the Kamloops Blazers junior hockey team. Despite its diverse portfolio, it’s a low-key family business. At least it was until 2011, when the mid-market acquired the Sutton Place Hotel chain and the Dallas Stars of the NHL. In June, Northland paid $198 million to Hong Kong businessman Christopher Ho for the five-star Suttons in Vancouver and Edmonton along with the North American rights to the Sutton Place brand. Then in November it bought the bankrupt Dallas Stars hockey team, formerly owned by Texas financier Tom Hicks. (Terms were not disclosed, but Forbes reported the deal involved US$50 million up front and a total cost, including assumed debt, of $240 million.) Ever since its own brush with insolvency in the 1980s, Northland has been quietly on the march. Founder Bob Gaglardi is worth $1.6 billion, according to our 2011 Rich 100 rankings. And with last year’s acquisitions, second-generation CEO Tom Gaglardi, 43, appears to have finally gained some respect. Jilted by former partner Francesco Aquilini out of a 2004 deal to buy the Vancouver Canucks (and denied satisfaction in the courts), he now sits at the NHL governors’ table as an equal. Not only that, high-end hoteliers must now prepare for competition—beginning in Vancouver, Edmoton and Revelstoke, B.C.—from a company once known for its budget hotels. But surprisingly, as Tom Gaglardi told Canadian Business managing editor Michael McCullough, Northland’s leap to the big leagues was not so much by design as due to a fortuitous series of circumstances.
Canadian Business: Tell me how the Sutton Place hotel acquisition came about. I understand that you were originally only looking at the Edmonton property.
Tom Gaglardi: We don’t have anything in downtown Edmonton. This is a nice hotel, good bones and a great location, very close to the new proposed Oilers’ home arena, so it was a property we really coveted. We pursued that, but the vendor was having more success with a portfolio sale of multiple properties. It became clear that we weren’t going to be able to buy that one alone.
CB: Was it your intent to run the Sutton as a luxury hotel under a different brand?
TG: We’ve got this four-star offering called Sandman Signature that we’ve developed. We’ve got a few of those. So in the absence of buying the Sutton Place brand, which we ultimately did, it would have been a Signature. We’re in the west in Edmonton, we’re in the south, but we’re not downtown. It’s kind of the piece we’ve been missing. And then the way the transaction came about: we had a feeling for how much we had to pay to get both [Edmonton and Vancouver hotels]. My father and I—at first there was quite a sticker shock with Vancouver.
CB: That’s a lot of money—you paid $164 million for the Vancouver Sutton Place.
TG: Yeah, it’s a lot. But it was pursued not just by Canadians but by American chains. Everybody was after that property. As a private family company, we’re not interested in getting into bidding wars. But ultimately we decided that the time was right. Debt’s difficult for people, but for those that can get it, it’s so cheap.
And then once we knew we were going to buy both Sutton hotels, and we knew the vendor’s plans for the other two Sutton Places, which was to sell them, we determined we really can’t buy these two things and not have the brand. So it was a necessary part of the transaction for us.
CB: What’s your vision for expanding the chain across Canada?
TG: We have Sandman in that three-star market. And then you look at Signature, which is more of a four. And then Sutton gives us a brand in the five-star market, which we’ve never had before. It lays out quite nicely for us because extending brands upward is always difficult. Now we have a brand that has a big following, and we can add to it. That’s what we intend to do. First thing we’ve done is, we’ve reflagged our landmark hotel in Revelstoke Mountain Resort Village [where Northland is the master developer], which is a five-star property. So we’ve just recently renamed that as a Sutton Place. We have an old development permit for downtown Calgary, the Beltline, for a 300-room hotel. That will be a Sutton Place too.
CB: The luxury hotel market in Canada is pretty well served already. Is there something you can bring to it, from the perspective of both the traveller and in terms of the business model?
TG: That’s funny, I don’t think the luxury market is over-served. When you look at it, we haven’t had a lot of new stock. Here in Vancouver, we’ve seen a few: Pacific Rim, the Rosewood, the Shangri-La. But when you look at those things, the hotel portions are pretty small. The Shangri-La is like 100 rooms or something. Typically, the luxury segment is made up of 20- or 30-year-old assets. The barriers to entry in luxury are tough. The supply has increased mostly in the mid-market. You look at Sutton Place Vancouver, with all the downturns and upturns we’ve had, that property’s got amazing stability. You’re talking about a property that runs at a healthy 80% occupancy even in a market like today when it’s not the strongest of times.
CB: It didn’t make any sense to buy the Toronto property?
TG: No, it wasn’t a fit for us. I wish it would have been. And Chicago, we just didn’t understand the market. We’re just getting busy in England. We just opened our first hotel in England, a Sandman Signature. We’ve got a full plate, put it that way. I was just shown an asset in Eastern Canada, and if it’s a fit, it would be a Sutton. So you could see a Sutton in six months in Eastern Canada, or it could be five years. I don’t know.
CB: Turning to the Dallas Stars, how did that deal come about? I heard NHL commissioner Gary Bettman approached you.
TG: I’ve known Gary for many years. We’ve had conversations for many years after the Vancouver result about looking at certain teams. This team came up in a conversation, that it might be available, and it’s a franchise that’s always interested me.
CB: You have relatives from there.
TG: My mother’s from Texas. I spent a lot of time when I was young in Texas. I have a lot of fond memories. I understand the place, and I’ve been there enough that it’s—a second home sounds kind of corny—but more than that, it’s a great place for commerce. You’re talking about the fourth-largest NHL market in America, growing like crazy, a very desirable place to live, great climate and really always been the anchor of the NHL’s southern market strategy. And it’s been a successful franchise for years.
CB: But obviously it wasn’t recently.
TG: It’s fallen on hard times.
CB: What went wrong, and what do you plan to change?
TG: When you have an owner that ran into trouble like Tom Hicks did.…You know, he’s a leveraged buyout guy, so he had a lot of debt, and he wasn’t able to continue to invest in the team the way he had been, and I think he got distracted. He made a bunch of mistakes with the business. He ramped up ticket prices too high. Tom said to me, “If there was a mistake to be made running the Dallas Stars, I made it.”
We have the advantage now of hindsight. I think the team has been well put together. Most of our best players are young. We’re in a good spot. We’re a low-payroll team. We’ve got lots of flexibility in being able to add guys. And it’s a huge market, a great sports market. And it was a full building for a number of years. If you go back to 2003, it was the No. 1 revenue team in the NHL. So you’re not talking about a market that was never there. We only have to recapture some of what they lost to be able to be a leading franchise again. I have no doubt we’ll get there. How fast is anybody’s guess. But since the ownership change, our attendance is up almost 5,000 people a game.
CB: Have you been to any of the NHL governors’ meetings yet?
TG: Yeah, the first one was at Pebble Beach.
CB: Has your relationship with the Canucks organization improved at all?
TG: When I was in Pebble Beach, I had a nice chat with Canucks president and general manager Mike Gillis. He’s a gentleman. It’s not an issue. Old news.
CB: You obviously have a proud family tradition to uphold (pointing to portrait of Tom’s grandfather, the late B.C. Highways minister Phil Gaglardi). Do have any plans for your own kids to take up the torch?
TG: I’ve got three boys. They’re six, seven and eight. I’d love to think they’d want to work with me and be in our family business. Frankly, if only one of the three ended up doing that, that would be fine. Or maybe in 15 years when they get through university I may change my mind about them. Maybe the company becomes something different. I really don’t know. I’m the oldest kid of my dad’s, and the best decision I ever made was to work with him. It’s been a rich relationship. I can’t imagine having done anything else. If I could replicate that with my three sons, or any one of them, I’d be a happy father.
CB: Are you the only one of your generation working in the family business?
TG: No, we all do. There’s four of us. My brother, Mitch, lives in England. He’s heading up the business there. I have a sister who’s a mom but works on projects, and I’ve got a sister in design, Devonna, who’s the youngest, not married yet. Hopefully soon.