Q&A: Family Brings Labovitz Home To Hotels

Courtesy: Matt M. Johnson | News Source: finance-commerce.com

When the new Element by Westin hotel next to Target Field in downtown Minneapolis opened earlier this month, Lion Hotel Group CEO Mark Labovitz was there with his wife and two children to stay on opening night.

Lion is part of the fourth-generation Labovitz Enterprises, a Duluth-based company that owned clothing retailer Maurices from its founding in 1931 until 1978. The Element marks a high point for Lion, which got its start as an investment vehicle for the family business.

“That’s been something that I don’t think the family got into intentionally,” Labovitz said in a recent interview. “I think it was a real estate tax shelter in the ’70s.”

Labovitz is serious about the hotel business and makes it a point to stay overnight in the company’s properties. It’s a business he came to a little late when he joined the family business in the early 2000s after working in finance for First Bank System (now U.S. Bank) and progenitors of RBC Wealth Management. Now 57, the Duluth native is focused on drawing guests to the Element.

But he’s pretty confident that the hotel’s location next to Target Field, the city’s largest light rail station and on top of the new Fillmore music venue will do a lot of the work for Lion.

Finance & Commerce recently sat down with Labovitz to learn about how he wound up in the family hotel and commercial real estate business, and what he likes to do with his free time.

Q: You started your career in finance, but you’re now in commercial real estate and hotel development and management. How did you wind up in this line of work?

A: It’s a question I’ve struggled to answer myself sometimes. Actually I did start off in finance, and a lot of my early experience was in Minneapolis. I moved down with most of my graduating class from UMD in 1985. The economy was terrible in 1985, particular in northern Minnesota, and I was very fortunate to get connected with an opportunity at a company that used to go by Dane Bosworth and Dane Rauscher. And of course now it’s Royal Bank of Canada Wealth Management.

My first two years were working for some dealmakers in the public finance department. So I was very lucky to see a lot of activity and learn from some very capable people for a couple of years in Minneapolis. I’ve always liked Minneapolis and really fell in love with it. So I’ve been based in Minneapolis except for business school, a couple years in 1988 through 1990. After that I did come back, because I got a job here faster than I could have in Los Angeles. The offers appeared here earlier. So that brought me back and I landed at First Bank System, worked there for six years and then Dane Rauscher hired me back to do market research and database management.

I did try to do marketing research as a consultant and work in the family business in the early 2000s. They’re good skills to have in one person, but they’re totally incompatible businesses. I couldn’t be a consultant involved in the family business. I got involved in that because my dad and his partner were in the stage of their careers where I was being invited to offer my opinion on things more often. Once you get one appendage in, you’re sort of in the quicksand.

Q: How does Lion Hotel Group, and particularly the Element, compete in the increasingly busy downtown Minneapolis hotel market?

A: Well, you know, we’ve been open a week we haven’t filled it up yet. We’re acutely aware that there’s an oversupply and there’s some beautiful inventory in the market. And on top of that, we’ve got a fair amount of everything from Sonder to VRBO. It’s all very concerning.

On the other hand, I just have a lot of confidence in this market to provide a steady amount of growth. We also think where we are with the Element is pretty unusual.

We have some advantages because of the nightlife and the First Draft and Fulton pubs right next door. The Twins are right there at Target Field. So we love our location and we’re on top of something that there’s been a lot of talk about, the Fillmore. I love live music. The opportunity to kind of be associated with that project was more than compelling.

I think we got a great brand. The rooms are very fresh. They appeal to the demographic that’s living in the North Loop. I think we’re going to do well, but it is going to take some time to roll into it.

Q: Where do you see opportunities that exist in the Minnesota hotel market?

A: Every flag is well represented in Minnesota. At this point, we think there’s plenty of rooms. That’s true in Duluth, for sure. I think it’s becoming true in Rochester.

We’d love to be in Rochester. It’s the town in size comparable to Duluth, it’s heavily health care based. It looks and sounds a lot like Duluth, but it’s very spendy to get in there.

I think we’re going to take a breath because construction costs are going to force everybody to take a breath, and then we’ll see how the economy does over the next couple of years. There may be more acceleration of the hotel market, but I think it’s going to soften. I think there might be some opportunities in the next couple of years to purchase. But our company’s gotten very picky at what it will buy in terms of building quality.

Q: How does running a fourth-generation family company differ from being a leader at someone else’s company?

A: I was 17 or 18 years in the kind of the stereotypical publicly traded company, and it is a lot different. In a family business, you kind of have the benefit of you’re just expected to be the leader. And people aren’t arguing with you too much about whether you are or not.

On the other hand, you might not have the meritocracy you want. I’ve seen family businesses where there’s lots of family there. I think that can be great. And then I’ve seen where there’s just too many people that are there because that was a way to get them a check.

We don’t have any other family members right now in the business. It was a pretty clean handoff between me and my dad.

I don’t want to be the guy that drops the platter. That is a burden. You’ve got a lot of people counting on you so and success is never assured. But I wouldn’t have it any other way.

Q: What do you like to do for fun when you’re away from work?

A: I’m lucky I’ve got a couple of really good hobbies. I ski when I can, although physically I’m not as much of a skier anymore. I also am a general aviation private pilot. And because our businesses is really headquartered in Duluth, I live in Minneapolis, and we have property in Florida and in Bozeman, Montana, I’m able to use our aircraft to do that. There’s a freedom to it and there’s also a lot of technical aspects to it. It’s my place to relax, because you can’t be really working when you’re doing that. It’s a very good distraction.

Q: Which words do you live by?

A: The customer is always right. And it’s more than just do they get a refund or not for the shirt that the button is missing on?

Over the long term, the customer’s always right. Their perception, whether or not you think your breakfast was good or your lobby is clean, that’s their perception. They’re right. That’s what they’re going to tell people. And I suppose now in our age of ratings, we have to operate like that.

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