Flying High: A Conversation with Tyler and Rebecca Morse, Owners of MCR Hotels

January 23, 2020
In the feature article of this issue of Owner to Owner, we sit down with Tyler Morse, founder and CEO of MCR Hotels, and his wife and creative partner, Rebecca Morse, to discuss developing the TWA Hotel, scaling the business and working with your spouse.

The year was 1962. John F. Kennedy was president. John Glenn became the first American in space. West Side Story won the Academy Award for Best Picture. The TWA Flight Center, which was commissioned by Howard Hughes and designed by Eero Saarinen, opened at New York’s JFK International Airport. Nearly 60 years have gone by, but you can still transport yourself to 1962 by visiting the new TWA Hotel in the former terminal.

No detail was spared by Tyler and Rebecca Morse of MCR Hotels in the development and creation of the hotel, down to the Saarinen mid-century modern furniture, TWA travel poster prints by David Klein, hotel uniforms by famed designer Stan Herman – who designed TWA flight attendant uniforms in the 1970s – rotary phones and Tab sodas that can be found throughout the property.

BBH sat down with Tyler and Rebecca Morse to discuss their latest passion project: the TWA Hotel. In this excerpted interview, we also cover growing and funding MCR, which has purchased and built 130 hotels, leadership, their investment approach and working together as creative partners. Wheels up!

The hotel business is very dynamic. It's the most complicated of the real estate asset classes, and it changes every day. Its complexity is the barrier to entry. 

Brown Brothers Harriman: Tyler and Rebecca, tell us a little about yourselves.  

Tyler Morse: I grew up in L.A. and went to college at UC Berkeley. I attended Harvard for business school and, after graduating 17 years ago, moved to New York. Leading up to founding MCR 14 years ago, I worked in a variety of different jobs. My experience has spanned from being a valet, ski instructor, airline baggage handler and even the youngest bank teller in the state of California to working at Ernst & Young, Morgan Stanley and Warner Music Group. I’m very proud of the diversity of my experience.

MCR started with a single hotel in Huntsville, Alabama, then another in Kalamazoo, Michigan, then we kept building – Georgia, Kentucky, Missouri. We bought about 110 hotels and built 20 hotels. Today, we own about 100 and have sold 30 along the way. We have around 5,000 employees and do business in 27 different states. I love the hotel business.

I’m also passionate about staying active. I’ve ridden my bike from Canada to Mexico, along the Pacific Coast Highway and Highway One. I’ve done five marathons and have done the Escape from Alcatraz Triathlon three times.

Rebecca Morse: Tyler and I graduated from Harvard the same year – he from the business school and I from the college. I was a corporate associate at Davis Polk & Wardwell for several years before Tyler encouraged me to pursue a career that used my creative passions. I worked as a writer for interior design and architecture publications, eventually becoming an editor-in-chief. I did everything from determining overall vision and look to researching, scouting locations and styling photo shoots. I loved it. When MCR began developing independent hotels, I saw the chance to apply those skills.

BBH: How did MCR come to be?

TM: After graduating from Harvard, I worked for Starwood Hotels and was Chairman and CEO Barry Sternlicht’s right hand guy. I bought and sold a lot of hotels and a couple of office buildings. I sold 350 acres of land in Italy and worked on buying a billion-and-a-half dollar pub business in the UK – everything you can imagine. One of the deals that I worked on was buying a company called Bliss, a spa, bath and beauty products company. The day before we closed, Barry Sternlicht suggested I run the business. Next thing you know, I’m the CEO of Bliss. I didn’t know anything about bath and beauty products, but I jumped in and grew the business from $30 million in sales to $110 million in sales over a three-and-a-half-year period. It was kind of an extraordinary run: it grew from being unprofitable to $17 million of EBITDA over that same period. But, I decided I didn’t want to spend my career in the cosmetics business. It wasn’t my passion, so I started MCR on a shoe-string budget with the Alabama hotel.

BBH: Did you always want to be an entrepreneur?

TM: Yes, I’ve always known that I’m an entrepreneur. It’s in the blood.

BBH: What about your passion for hotels? Was there something deep-seated there or did it develop over time?

TM: I like hotels because I love traveling and the travel business.  I’ve traveled to 95 countries and have flown eight or nine million miles on commercial airliners – 98% of that in the middle seat on the back of the bus. The hotel business is very dynamic. It’s the most complicated of the real estate asset classes, and it changes every day. Its complexity is the barrier to entry. There are about 58,000 hotels, just in the United States. I’d say that 15% of them are run really well, so that creates a great deal of opportunity.

BBH: How did you start the first one? Did you create a fund?

TM: No, it was deal by deal up until 2016. We’d find a good investment, call up some friends and family and capitalize the equity and then get a bank loan. It started with small hotels, then grew to medium-sized ones. I did a couple of individually capitalized portfolio acquisitions, then we raised a discretionary fund in 2016. We are almost finished deploying the fund.

BBH: You touched on this when you said that only 15% of hotels are well run. What does it take to be a well-run hotel, and how do you differentiate when there are so many of them out there?

TM: I would say it’s partly design – the creativity behind the building. You have to activate them every month – that’s what keeps people coming back. I subscribe to the European hotel model, where hotels are meeting places for communities. They are not just about the guests that are in the building; they are about the surrounding neighborhood. So, it is part design and creativity, part distribution. The distribution landscape continues to change. It’s important how you manage your sales channels, and it’s really quite complicated. You can always sell the rooms, but it’s a question of what price you can sell them for. If you give away the rooms early at a low price, then you leave some profitability on the table. If you take more risk and hold back your inventory and wait until closer to the time of stay, you could potentially get more profits, but you might go empty. You’ve got to play that risk analysis game.

BBH: Rebecca, you worked with Tyler on The High Line Hotel. Talk about how you identified the opportunity and the development of the hotel.

RM: The High Line Hotel is a dream project – a magnificent architectural jewel in the middle of one of New York City’s most charming areas. The High Line Hotel was a former Episcopalian Seminary, turned former priest housing, which we transformed into a hotel. Our beautiful building feels like the grand dame of Chelsea, and we’ve always wanted it to be an anchor for our special neighborhood. Our seasonal events are open to all, free of charge. It has been thrilling to see our annual Halloween dog costume parade grow from a quirky neighborhood tradition to an event attended by hundreds of people and their pets. The first year we hosted an Easter egg hunt, I stayed up all night assembling paper Easter egg lanterns, and Tyler and I hung them from the trees in the front yard while our older daughter slept in her stroller. Five years later, we have lines for blocks to get into a party that includes a petting zoo and crafts. And our holiday tree lighting in December is a must-do – whether to see our spectacular evergreen aglow or to enjoy a couple hot toddies!

But what I’m most proud of is the vibe of The High Line Hotel. It’s incredibly cool of course. But the feeling is one of total openness and warmth. I love walking through the lobby and seeing locals, couples, tourists, babies, dogs, grandparents – it’s as eclectic and welcoming as New York City itself. There are different languages being spoken, families visiting, novels being written on laptops, meetings taking place – there are always a lot of great stories unfolding in The High Line Hotel lobby.

BBH: How much of MCR operations is centralized versus decentralized?

TM: We have about 200 people above property and about 4,800 people who work in the hotels. We have two offices, one in New York and one in Dallas, and that is where revenue management, operations, e-commerce, creative acquisitions, marketing and sales all sit. We purposely don’t distribute out the IT role to individual hotels; we keep that at corporate, and we do the same thing with marketing. Marketing is a very challenging field. Traditionally, hotels promote themselves from within the building. We centralize that and then push it out to our individual hotels.

BBH: How do you spend your time and think about leadership?

TM: There’s no shortage of hotels out there; they’re everywhere. A huge part of how you differentiate your hotel company is culture. People want to have fun when they come to work. We look at fun in a competitive way: doing it better than the other guys. It’s fun to outperform the competitors. There’s a metric in the hotel business called rev-par index, which is revenue per available room. It’s an amalgam of distribution and IT and marketing and great customer service and loyalty. The metric lets you assess daily performance and informs how we can create an exceptional guest experience so they keep coming back. When you see yourself winning, that’s fun.

We say, “happy employees lead to happy guests.” The happiness gets passed through, so if the team is happy, then the guests are happy. And if the team is not happy, then the guests definitely won’t be happy.

BBH: How would you describe your investment approach? How do you think about investing in new properties?

TM: To put it succinctly, what’s our edge? What can we do with this hotel better than the people we are running it for? It’s about differentiating. And how can we best our competitors?

BBH: What would you say is your biggest success and your biggest challenge as CEO?

TM: Launching the TWA Hotel was a big deal. Raising our second discretionary investment fund was a big success.

The biggest challenge is integrating the teams when you have thousands of people. We have an annual general manager conference, and we are up to 500 people attending it now. It’s about bringing the team together and getting everybody to work collaboratively towards progress.

BBH: You mentioned TWA. How did that project come to be? It was definitely unique compared to what else you had previously done.

TM: Yes, it was. We won an RFP from The Port Authority of New York. It was a very opened-ended RFP, but we beat some strong competitors. People often ask me why we won, and I think it’s because we had a good financial plan, a great operating plan and terrific creative. The design of the buildings and the project, as well as the enthusiasm for the project, was what won us the deal. We won it about five years ago, and then it took us about four-and-a-half years to bring it all together. It’s a national historical landmark, which creates a lot of additional challenges and a lot of additional hurdles to jump through. In all, we dealt with 22 government agencies and 176 national consulting firms. It’s such a stunning building, and I think a lot of people appreciate the care and the detail that we put into it.

RM: I remember walking through the TWA Flight Center right after MCR won the deal. It had been boarded up for over a decade, but you could still feel the magic of the building. It was palpable. And now this wonderful American architectural icon is open for everyone to enjoy – whether you are an overnight guest, a gym member, have a dinner reservation at Jean-Georges’ Paris Café or are just wandering through. My favorite Friday night activity is sitting in The Sunken Lounge watching how delighted people are with the hotel – whether twisting in the Twister Room, browsing at the TWA Shop or taking in the interactive museum exhibits and custom Solari Board messages.

A huge part of how you differentiate your hotel company is culture. People want to have fun when they come to work. We look at fun in a competitive way: doing it better than the other guys. 

BBH: Tell me about how you and Rebecca became creative partners.

TM: Rebecca has always been my creative partner. The High Line Hotel was when we started to work together professionally. She got excited about it, and we got excited about working together. We went from The High Line to TWA, and now she runs our creative group. We have about 15 people in the group, and they do a terrific job.

BBH: What are the dynamics of working with a spouse like?

TM: There are differences of opinions, in how to execute different creative functions, but that’s standard in any working relationship. We have a mutual respect and trust that two co-workers just don’t have. That carries us through.

RM: I share Tyler’s vision of MCR as a place of integrity, respect, innovation and excellence. We are lucky. We have the most unbelievable people at MCR – from the property teams to the corporate staff. To me, they all feel like family.

Having shared goals is extremely efficient. Between the two of us, we can get a lot done in one day. We have each other’s backs. We really listen to each other and can both make each other laugh!

BBH: You have two relatively young kids. Do you see this becoming a family business? Would you encourage them to work with you at some point?

TM: I love what I do; Rebecca loves what she does; and I think that’s the most important thing. Our two daughters are eight and five. They are amazing. If they want to be in this business, we’d love that, but the key to success in life is enjoying what you do. I wouldn’t want to push them into this if they were not passionate about it. There are a lot of different directions you can go in hotels and real estate development, so they may find something they love, and that’d be terrific.

RM: I hope our daughters pursue their own passions, whatever those may be – just like my parents encouraged me to do. On the other hand, they already work with MCR in a way. Our kitchen island has been the scene of as many meetings as any boardroom, and the girls are not shy with their opinions. And they have some great ideas. They spend a lot of time at all of our properties. I think MCR’s hotels feel like familiar and warm landing spots to them. I hope they feel like that to all visitors.

No matter what our daughters end up doing, the hotel industry has been helpful in exposing them to the idea of a strong work ethic. I think it’s difficult for children to conceptualize spreadsheets being manipulated on a computer or emails being typed on an iPhone. At a hotel, the concept of hard work is quite tangible. It’s easier for someone young to grasp – there are rooms to be cleaned, suitcases to be carried, coffees to be made, cars to be parked. From managers to housekeepers to chefs, there are many roles to be filled, each quite different, each equally integral to a team that can only function as a sum of its parts. It is a concept that is important to us and which we have endeavored to show our daughters.

I share Tyler's vision of MCR as a place of integrity, respect, innovation and excellence. 

BBH: What the biggest risk you’ve ever taken at MCR?

TM: Probably TWA. We were a relatively small firm; it’s a big project; and it was a very challenging project. It’s something we’re extremely proud of, but there were a lot of sleepless nights.

BBH: Are there plans to do more unique hotels?

TM: We have some other projects up our sleeves!

BBH: Tyler and Rebecca, thank you so much for your time and insights.

Interview conducted and article written by Jacob Turner.

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