Eric Watson, COO of MasterBUILT Hotels
- Brampton, ON & Calgary, AB
- Married to Kimberly, who manages engineering and operations for the Christina Lake oil sands project operated by Cenovus, Father to Ella, Ka
- Engineering degree (Geomatics) from the University of Calgary
While studying engineering at the University of Calgary, Eric Watson picked up an unusual nickname from his classmates. They called him Wall Street Watson because of his fascination with financial statements, quarterly reports. balance sheets, bulls and bears. That strong interest eventually led him away from physical science and pointed him in new career directions, including venture capital and real estate investment. As chief operating officer of Calgary-based MasterBUILT Hotels, one of the few vertically integrated hotel companies in Canada, Watson plays a prominent role for this groundbreaking enterprise. A turnkey-style operator, MasterBUILT develops, builds and operates these spanking new hotels, remaining involved with virtually every aspect of the full life cycle of each of its destination hotels. At the moment, senior management is particularly excited about its relationship with the Wyndham Hotel Group, which has granted permission for the Calgary team to market the Microtel by Wyndham brand across Canada. With nine of these limited-service hotels already in operation and a corporate commitment to open 69 more by 2036, the company is determined to alter the landscape of the Canadian hospitality industry.
1. Your post-secondary history would suggest an interest in the physical sciences. Can we begin with a discussion of your studies at U of C?
At the time, Elizabeth Cannon, now the president and vice-chancellor of the university, was a geomatics professor in the engineering faculty. Calgary was one of two schools in Canada that were among the world’s leaders in the study of geomatics.
2. And yet, you did not pursue engineering as a career. Why not?
When I came out of U of C in the mid-‘90s, there really weren’t a lot of jobs available in the field of geomatics. Most grads tended to branch out into land surveying. But there wasn’t a lot of action in the field of GPS and geospatial information systems (GIS). I still remember being on campus and trying to explain GPS to people. They generally had a blank look on their faces. Now it’s ubiquitous. Everybody’s got it on their phones. Looking back, I probably got into the field a bit too early, before these systems became commercially viable. Then, too, my interests always lay on the commercial side of things, rather than the technical engineering side. Most of my summer jobs were outside the field as well, working with TransCanada Corp. as a business analyst. Heck, I started trading stocks back when I was 12 years old.
3. What would you say sparked your keen interest in the financial side of things?
Well, my dad, George Watson, had a very successful business career, including a position as VP of finance for Dome Petroleum. He’s still quite active and continues to sit on the boards of a number of successful companies. Dad got his MBA from Queen’s University in Kingston, and he exerted a strong influence on me. I was anxious to make my mark in the business world and always intended to go back and get an MBA of my own. But things got too busy too quickly and I’ve never found the time to manage that. I guess you could say I was able to learn on the job. I was able to position myself pretty well without it. I still read 15 to 20 books a year on management and finance, so it’s a continuous learning process.
4. How did you get your career rolling?
Well, after a false start working with a company that eventually went under, I wound up working for a venture capital fund as a financial analyst. We got involved in a new technology company and raised around $7 million in seed capital. This was a company called Critical Control Solutions, which went through a series of evolutions but ended up as quite a successful enterprise.
5. But eventually you developed an interest in real estate?
Yes, although shortly after leaving the VC fund, I did some consulting work with Enbridge, primarily on business development and financial analysis. Meanwhile, I was looking for the next cycle to establish itself. I found myself with some capital I wanted to invest and became pretty active in real estate investment around 2003.
6. Where did your interest in real estate lead you?
I started my own development/consulting company, doing project work for condo motels, and also developed a brokerage business. Later on, that organization merged with Bellstar Hotels & Resorts in 2010, to create the largest resort development and management company in Western Canada.
7. Can you discuss the origins of your current employer, MasterBUILT Hotels?
MasterBUILT Hotels was founded by Superior Lodging, which equates to Marc Staniloff and his family, very well-known people here in Calgary. Marc is really the guy who built up the Super 8 brand across this country. Marc co-founded MasterBUILT with his associate Jay Westman of Jayman MasterBUILT, which helps to explain the branding of the current enterprise. In April of 2011, the partners signed a deal with Wyndham, the major global hotel group that also owns the Super 8 brand. The deal gave Marc and Jay the rights to introduce the Microtel by Wyndham into Canada. This is a fresh new style of limited-service hotel that’s catching on very quickly in this country.
8. OK, so we have Eric Watson on one hand and MasterBUILT Hotels on the other. How did the two of you get together?
I had been talking with recruiters while I was still with Bellstar. Then I attended the Western Canadian Hotel Investment Conference, watching Marc taking part in a panel discussion. Marc was in a dejected mood because a longtime partner had recently left his company. A couple of weeks later, a recruiter called and began describing a situation to me. I remember thinking, ‘this sounds familiar.’ Sure enough, he was talking about a position with Marc’s company, Superior Lodging. After a few months of considering the offer, I decided to join them and help with the launch of MasterBUILT.
9. What kind of team did you join at that time?
There was a team of maybe five or six people, initially operating under the supervision of Superior Lodging. Today, we’re up to 150 people, with plans to expand to 300 by the end of the year. About a year ago, we decided to roll out MasterBUILT Hotels on its own. That’s when Marc and Jay asked me to take over the operations of MasterBUILT.
10. What can you tell me about Microtel by Wyndham?
We’re delighted with this model. The Microtel is an all-new, purpose-built construction. You can’t take an old box, an old building, and convert it into one of these. Primarily, we’re building in smaller, secondary or tertiary markets, generally resource-rich, busy areas with a need for modern, clean hotel rooms. From the development side, it’s very efficient to build. At the same time it provides the guests with everything they could possible want.
11. Is this a proven model?
Well, Mictrotel Inn & Suites by Wyndham won the J.D. Power Award for customer satisfaction for the second successive year in 2014. Microtel has been a leader among its particular market segment during the last several years. It’s a proven brand that we’re introducing into Canada.
12. Would you describe the market niche for these hotels as “economy” or “budget?”
In the U.S., yes. But in Canada, we’re bringing them more into the mid-market because it’s more expensive to do business here. There isn’t really an ‘economy’ segment here, due to our higher construction and labour costs. These hotels play in with brands such as Holiday Inn Express or Best Western Plus.
13. What qualities serve to differentiate your Microtels from the competition?
It’s the consistency of the product that appeals to our customers. Even though we’re a new name to many Canadians, the people who travel to our markets are certainly becoming familiar with it. I equate it to a product such as McDonalds. Whether you’re in Newfoundland or Victoria, B.C., the Big Mac is built exactly the same way and tastes the same way. We strive to maintain that level of consistency and that’s what has made our product so successful in the U.S.
14. How old is this particular concept?
The concept itself was first formulated during the early ‘90s in the U.S. But in terms of Canada, there were a couple of Microtels built in 2006 and 2008. Under this particular brand, the first Microtel to open under the new prototype was in Estevan, Sask., in September 2012. So when you stop to think about it, the oldest hotel in our system was brand new less than three years ago. That makes ours by far the newest fleet of hotels in the country.
15. What is the greatest advantage to your company as proprietors of this particular business model?
I think the main thing is the efficiency of the build and the general high quality of each hotel. If you look at our competitive position in the mid-market, we’re able to build at an average of 20 per cent lower cost than our competitors. That comes down to efficiency of design, construction efficiency and our focus on the things that really seem to matter most to the guest. We concentrate on providing the best possible hotel experience for our guests, while keeping our cost and guest cost to a minimum.
16. So the model strives to achieve the maximum benefit for both guest and owner/operator?
Yes, that’s correct. Look at the Super 8 business model. People involved in that company like to say, “It may not be as sexy to develop as the Marriott, but it makes me a lot more money.” It’s the same thing with us. We’re not the Hilton, we’re not the Marriott. But our hotels look really sharp and fresh and our guests really seem to enjoy the experience.
17. How many hotels do you have up and running?
Currently, we have nine and plan to have 14 open by the end of the year. We recently opened our ninth hotel in Whitecourt, Alta. We’re under construction in Fort St. John, B.C., Bonnyville, Alta., and Kirkland Lake, Ont., where there’s a lot of gold-mining activity.
18. What tends to characterize your target markets?
Most of them are actively involved in mining or oil recovery. For the most part, we’ve tried to identify under-supplied markets, or, as we say, under-demolished markets in which travelers are poorly served by old, old inventory. There may be a lot of supply, but they don’t boast a lot of quality supply.
19. Does the company tend to lease the property it utilizes or does it purchase the land outright?
We generally buy the land. A lot of these communities lack an abundance of serviced land, so we try to evaluate what opportunities exist for someone else to come in and build more hotels. Kitimat, B.C., is like that, for example. We went in there and bought up a lot of commercial land so it would be very difficult for new competitors to follow us into Kitimat without facing extraordinary costs.
20. Is that part of your overall strategy; to come in to a particular market and buy large parcels of land?
Not typically. Ideally, we like to get a serviced piece of property. We got in to Kitimat quite early, more than two years ago. We realize there is some risk associated with that particular market (which may or may not become a major hub for LNG exports), but it’s a calculated risk we were prepared to take. We definitely have a fairly extensive land portfolio, but we’re not necessarily land bankers. We buy land to develop and, ultimately, develop hotels on it.