Made Possible By
In the late 1990s, when Ashish Parikh was working in Boston for Fleet Financial Group, he received a call from an uncle regarding a little-known hospitality company that his uncle and a number of partners had helped to establish and grow.
The uncle explained that the partners were interested in hiring a CFO, and it quickly became clear to Parikh that he was the candidate that his uncle had in mind.
“Ninety-nine out of 100 days, I might have laughed and told him, ‘I know nothing about the lodging business or REITs—it’s not for me,’” explains Parikh, who says that his uncle sensed his hesitation and assured him that the CFO that he and his partners had in mind was a young executive who would be able to grow with the business.
“Here was group of partners who had lived in roadside motels for 10 years and had grown a company from nothing to a $100 million business,” explains Parikh, who recalls quickly becoming smitten with the business’s forward-looking and entrepreneurial mind-set.
Still, along with the position came certain compromises. “Basically, we’d be moving to Harrisburg, and I’d be working in the back of a Holiday Inn in a windowless office,” Parikh recalls telling his wife, who, while highly supportive, advised him not to accept the position unless he was willing to commit to 3 or 4 years to evaluate the role “and give it a full shot.”
Twenty years later, Hersha Hospitality is no longer little known inside the lodging space, where the company’s portfolio includes 48 hotels (owned or jointly owned) and its affiliate management company operates 130 hotels for such notable hospitality investors and owners as Blackstone and Starwood Capital. Explains Parikh: “Not every business is an overnight success. I like to say that this has been a 20-year overnight success.” –Jack Sweeney jb
Guest: Ashish Parikh
Company: Hersha Hospitality Trust
Headquarters: Philadelphia | PA
CFOTL: What comes to mind when we ask for a finance strategic moment?
Parikh: I think that I’d have to go back to the great financial crisis for a finance moment, the week after Lehman Brothers failed, when I actually pulled all of the top-line numbers for the hotel. For the first time in my life, I said to myself, “Well, something is just drastically wrong with our accounting system because these numbers just don’t make sense. We’ve never seen a drop this precipitously this quickly.” That was the time of one of the hardest decisions, because we had never cut our dividend up to that point. From 1999 to 2009, we had been a very consistent dividend payer. Not one of the highest dividend payers in the lodging REIT world, but I think that’s when you look at forward bookings, you look at what’s happening, and you have to make a very difficult decision. We probably cut our dividend at that time by 70% because we looked at it, I looked at it, and I said, “It’s more important to batten down the hatches to make sure that we don’t violate any of our debt covenants, to make sure that this company’s on sound footing for the long term.”
Of course, the shareholders aren’t going to like their dividends being cut by 70%, but it was the right move. You know, you can’t let Wall Street and your investors’ sentiment on any single day drive your decision-making. There are times when you have to call it the way you see it. I’m happy that we did because it would have been very challenging to continue to pay that type of dividend—and I’m sure that we would have violated some type of cash flow debt covenant. jb