From Brink of Bankruptcy to Billionaire: Hockey and Hotels Tom Gaglardi
Billionaire hospitality magnate Tom Gaglardi, 52, runs the largest family owned hospitality company in Canada, Northland Properties, founded by his dad, Bob, in 1963.
Northland owns the NHL Dallas Stars hockey team as well as the WHL Kamloops Blazers. It has a large portfolio of hotels with the Sandman Hotel Group and Sutton Place Hotels & Resorts, several restaurant chains including Denny's Restaurants of Canada, Moxie's Classic Grill, Chop Steakhouse & Bar and Shark Club Bar & Grill. Northland owns Grouse Mountain and Revelstoke Ski Resort. The company has over 12,000 employees throughout North America and Europe.
Gaglardi remembers calling his dad on a payphone after acing a grade 8 math exam to declare his intentions to take over the family business. He stayed true to his word and was appointed President of the Sandman Hotel Group at age 23 and took over the reins at Northland at age 26.
“[Dad] was away a lot... That’s the price you pay for being an entrepreneur and building what he was able to get built.”
Gaglardi attended UBC and said it allowed him to hone his learning and communication skills. “When we interview people, having a degree is very important for that reason. I don’t really care what subject it’s in.”
He left UBC half way through fourth year to help his dad rescue Northland from bankruptcy. Excess debt in the office division nearly crushed the company when interest rates soared past 20% in the mid 1980s.
“To feel like he needed and wanted me was a pretty neat feeling at the time. I was excited.”
The Game Changer to Ramp Up Hotel Occupancies
To recover, Northland focused on the core of their business, rebuilding the business one hotel at a time. Acquiring the rights to Denny’s Restaurants in Western Canada was a game-changer for Northland, according to Gaglardi, which started to build Denny’s’ in conjunction with Sandman Inns. “That started to be a lucrative combination and we still do that today. We were the first in Canada to brand restaurants attached to hotels. That was a key differentiator for us that really ramped our hotel occupancies. Historically hotel restaurants are money losers. We were able to take a money loser and turn it into a profit center. The execution of that strategy got us off our knees to stand up and from standing up we started to walk, then we started to run, then we started to sprint. It took a few years but sticking to your core business and staying focused on execution of your strategy is really the key.” By the mid 90’s the company was beginning to see daylight.
Keys to successful real estate investing
To be successful in real estate, Gaglardi says build what the market wants in locations with multiple demand generators: “commercial notes, industrial parks, airports, major highways, shopping and retail. We don’t do sites unless they have multiple demand generators… We don’t go into centres with less than 75,000-100,000 people.”
“Location, product and management are the three keys and it’s tough to survive without all three of them.”
“Hotels and restaurants are the riskiest class of real estate. With the risk comes the reward. Our returns on equity are higher in this class than any other asset class.”
“The key to being successful in real estate is liquidity. Making sure you have enough of it. Couldn’t hold on through a down period. Staying power will come out successful.”
“We’ve been less aggressive from a debt perspective… then perhaps my dad was 35 years ago.”
“We are a unique company because we are vertically integrated. Everything in house from buying land, designing what we build, constructing it, owning it, operating it, branding it. We own virtually all of our brands.”
“Being vertically integrated we can accomplish things for cheaper than the general market can. Look for an edge at every level along the way.”
“Sports is a natural extension of hospitality. Having a great product and service. Selling an inventory that expires.”
Gaglardi says he spends 5-10% of his time on the hockey side of the business, and is leveraging the Dallas Stars franchise, which Northland acquired in 2011, into a greater real estate and hospitality presence in Texas. Northland is also expanding in England, Scotland and Ireland.
Gaglardi advises the next generation to move mountains to work with leaders in their chosen fields. “Young people ask me what to do to be successful? Find a mentor, that’s the best advice I could give you.”
We are grateful to Tom for the opportunity to learn about his story and Northland. You can learn more about Northland at their web site: https://northland.ca/