Taking The Plunge

by Cara Gardner


What happens when a mom and pop business really starts to succeed? Growth can be scary -- there's always the possibility that as you speed into the future, the wheels could fall off. Most people think lack of growth kills businesses, but too much growth can kill them even faster.


Spokane's homegrown WestCoast Hospitality is an example of a firm that is still riding through the uncertain ebb and flow of rapid growth. It's been doing that since 1937, in the darkest hour of the Great Depression, when Lou Barbieri, son of a Wallace, Idaho, miner, and Frank Goodale started representing property owners by collecting rent and fixing leaky faucets -- the glamorous stuff.


Lessons learned all those years ago are not lost on the new generation of Barbieris, who have turned the company Lou and Frank started into a major player in the hospitality industry on the West Coast, with more than 5,000 employees and nearly 90 hotels.


"The truth of the matter," says CEO Don Barbieri of his father's humble beginnings, "was that in 1937 there were very few jobs. In '37, the economy was fragile, and today the economy is fragile. When I listen to my father's stories, it sounds very similar to what we have today."


The impending war and the gloomy stock market may have pushed many businesses into a wait-and-see approach, but neither have stopped WestCoast Hospitality from making bold moves. Since 2000, it has nearly quadrupled its number of hotels. What's their secret? Barbieri says he has built a $60 million, publicly traded company on the idea that what's good for the local community counts.


Case in point: WestCoast Hospitality recently doubled its properties from 45 to nearly 90 by acquiring the well-known Red Lion Hotel chain. Coupled with the business acquisition, the company unveiled Team Red, a volunteer program that gets both employees and guests to pitch in on community-based volunteer efforts.


Last week, in a ceremony attended by the mayor, the president of the Chamber of Commerce and many other well-wishers, WestCoast officially changed the names of its hotels to Red Lion. This, executives say, will build stronger brand recognition as the Spokane company postures to expand.


"We want to increase in the Midwest and Southwest, particularly in Chicago, Dallas and St. Louis," says Stephen Barbieri, vice president and chief communications officer, and Don's son. "The Red Lion name is recognized. It has a good reputation."





The Philosophical Difference -- Don Barbieri, who announced his retirement from his post as WestCoast CEO earlier this week, says he believes in "going where your emotion takes you." Perhaps a remnant of wisdom passed down from his university days in the '60s, this philosophy led Don to quit his doctoral work in urban planning at the University of Washington and join his father's company in 1969 after one of Goodale & amp; Barbieri's five employees died.


He may have been a bit of a hippie, Stephen says of his dad, but Don was no slacker. He emerged from the University of Santa Clara as a respected campus activist after starting the student organization, Santa Clara Community Action Program (SCCAP), which is still running successfully. Don Barbieri also had a stint working on Robert Kennedy's presidential campaign.


"He had new ideas," Stephen Barbieri says of his dad. "He'd say he's a fiscal conservative and a social liberal."


Don's first project was to utilize the subsidies being offered to develop low-income housing. Goodale & amp; Barbieri obtained and developed properties, promoting affordable housing in Spokane.


"We are currently the biggest manager of low-income housing in Spokane," Stephen Barbieri says. But Don's eye for opportunity didn't stop there.


"He saw an opportunity with the World's Fair," Stephen says. "That's when we built the River Inn."


Under the Cavanaugh's brand name, the company opened hotels in Washington, Idaho and Montana. In 1999, after acquiring WestCoast Hotels, the company adopted the WestCoast name, and renamed the business WestCoast Hospitality Corporation.


But it was in the mid-1980s that the company found a business opportunity that has helped power its rise: selling tickets.


"The city put out the word that it was looking for a business to take over ticketing for city events," Stephen says.


Don explains it more as a lightning flash of inspiration rather than the result of some strategic plan: "I was walking across Riverfront Park having left a meeting at the convention center, and I thought, 'We have a call center -- why couldn't we do it?' "


"We started out as G & amp;B Select-a-Seat in 1986," Stephen says. "Essentially the ticketing company covered Spokane and its venues for the Opera House and Coliseum. We spread out from there to do [ticketing] around the Inland Northwest such as the University of Idaho, WSU and additional venues in the area. Then in October of 1999, we acquired Fasttix and that was our entrance into all of Oregon and also the Seattle area. Shortly thereafter, we acquired Colorado Neighborhood Box Office; it was our intro to the Colorado market."


Last year, all of their ticketing agencies became TicketsWest, and today WCHC sells more than 3.5 million tickets a year. And every ticket sold brings WestCoast and promoters a $2 handling fee and a convenience fee of anywhere from $1-$6.50 (still less than bigger firms like Ticketmaster, says Stephen). Do the math: It's a cash cow, and since 1986 it has helped fuel the company's growth.


WestCoast maintains the franchise by competing for contracts with public facilities when they come up for renewal, typically every five years.


But with their entry into the world of ticketing came the realization that Spokane could support more cultural events than it was at the time. Now in its second decade, the firm's Best of Broadway series has become an indispensable part of the local arts scene, bringing such national touring shows as Rent, Miss Saigon and Phantom of the Opera in recent years. The economic impact of these shows is considerable, as 50 percent of the subscribers to the series come from at least 100 miles away.





Ring That Bell -- In 1998, looking for an infusion of capital to boost growth even more, WCHC decided to go public. "It was a natural progression," Stephen Barbieri says. "We thought there was still so much room to grow. The hotel industry was going strong."


It was a good time for the Barbieri family, Stephen recalls. "We just went public, and my grandmother got to ring the bell for the New York Stock Exchange. It was the first day that the NYSE went over 9,000 points. Right when it went over, everyone on the floor went crazy. We were all so happy right then."
But WestCoast Hospitality's introduction was followed by a harsh reminder that they had, indeed, joined the big leagues. Soon, the industry started experiencing changes that sent WestCoast's stock -- along with that of other hotel chains -- on a downward spiral.


"The ensuing year, there was a lot of overbuilding [in the industry], and the value went down. Revenue per available room was not increasing as much as it had in 1998," Stephen says, adding that the company wasn't -- and still isn't -- worried.


"The hotel industry is historically cyclical," Stephen says, explaining that strong occupancy rates produce rapid industry development. This sends occupancy rates down, which then halts the development until the rates go back up. The last downward cycle was in 1993, Stephen says, right after the Gulf War. The height of that cycle was in '98, when WCHC went public. But the problem this time around, Stephen admits, is that hotel stocks haven't been going back upward, as they now should be. In fact, the opposite has occurred.


"[WCHC] stock is lower now that it has ever been," says James Bellessa, a financial analyst with DA Davidson in Montana. Though Bellessa stopped actively analyzing the company's stock, he says it's easy to see why the whole lodging industry is faltering.


"It's the 9/11 fallout, the slower economy, geopolitical worries. People are traveling less. The hospitality sector is getting hit by that. No one knows how long this will last," Bellussa says.


WCHC's stock is currently just above its 52-week low. A bleak number, but not unlike other corporations like Hilton and Marriott, says Bellussa, which are in similar positions.


If the downturn in travel hasn't been hard enough, keeping up with larger, better-known hotel chains has created a kind of double whammy for WestCoast to deal with.


"We've not been well-known across the county," says Don. "We have a position in the stock market, but visibility is not there. This is why we're rebranding under one flag, to be better known across the country."


The rebranding of hotels to the Red Lion chain, Stephen says, will trigger a new phase of expansion. But as the company competes more aggressively in the market, attempting to meet financial goals, Don says he's focused on one goal in particular.


"I don't want to lose the soul of the company based on sheer growth. How we walk the talk of community service, while coupling business strategies that allow us to be a visionary company so we are thinking long-term and not just quarter to quarter, is important" Don says, "That's what I've always wanted to do."


To deliver on that ethic, WestCoast launched Team Red to encourage WCHC's 5,000 employees and its guests to volunteer in their communities. Red Lion hotels are offering free rooms for people who participate in a day of Team Red community events. Each core business under WCHC's corporate umbrella has teams of volunteers that work directly in the communities they do business in.





The Next Step -- WestCoast Hospitality is entering a critical -- some might say dangerous -- stretch. It has grown fast and now controls a sprawling operation covering 15 states, 2.5 million square feet of managed commercial and retail space, 2,600 residential units and an aggressive ticketing company. This is where you have to make sure the wheels don't fall off. The company acquired most of this in less than 30 years, and Don points to a long list of employees and managers as being responsible for the company's success.


Managing and maintaining this pace isn't easy, and on Monday Don Barbieri acknowledged that he's not the right person to take WestCoast to the next level as he announced the firm would seek out a new CEO.


"As the company's grown and you're running day-to-day operations, you get to the point where you're asking, 'Where's my joy?' My joy is in creation," says Don, who plans to stay with the company but in a different role. "What I really, really like to do is envision long-term planning and development -- working with communities. I always have.


"I think what a good CEO has to do is check your ego at the door and realize when it's time to go," he continues. "It's that time where [WCHC] is the size that someone is going to be better at it than I am."


Don Barbieri will remain CEO until the right successor comes along.


Whoever comes to lead WestCoast Hospitality, they'll be wise to honor the company's deep but humble roots. In a way, WestCoast seems to be out to prove that the mom and pop ethic is not a function of size: With consistent leadership and the right decisions, WestCoast has continued to put its communities first even as it spans a good chunk of a continent and employs more than the population of its founder's hometown.


"The single most important thing," Don Barbieri says of his business philosophy, "is people developing a caring attitude about the community. It doesn't matter about the size of the company. It's an attitude that can be implemented anytime. What's good for the community is good for the business -- and the person."





Ted S. McGregor Jr. contributed to this report.





Publication date: 03/06/03