Railways are part of the narrative thread of the West. The “end of steel” was where wilderness began, but with Confederation, B.C. opened wide to development from Rogers Pass south across the Interior and north to Prince Rupert.
Rob O’Neill, president and CEO of American Hotel Income Properties REIT LP (AHIP), was steeped in the lore of the rails from an early age, hawking papers to passengers travelling from Vancouver to Prince George and serving up sandwiches as part of his father’s business, O’Neill Railway Catering Ltd.
“We did 12-hour days every day. So I worked from, really, 12 years on. And when I was 19 I decided I wanted to go into the business,” said O’Neill, now 68.
O’Neill knows the trade down to the smallest detail, and what it takes to make properties work. A veteran of the railway catering business as well as hotels, he launched AHIP in 2013 with 32 railway hotels operating under the Oak Tree Inn banner. This past June, AHIP acquired 18 hotels in the U.S. Northeast. It now owns 113 properties.
“We’re striking towards $2 billion here in this enterprise,” O’Neill said of AHIP’s assets. Revenues in the latest fiscal year totalled US$173.5 million, netting a profit of US$9.3 million.
Acquiring the Oak Tree Inn properties was an opportunity to secure and expand a business supported by federal regulations adopted in 1978 that required U.S. rail crews to lodge at least a half-mile from switching operations – rules aimed at addressing fatigue by keeping sleeping railroad workers away from high-decibel noise.
“It wasn’t unusual to have hotels with 110% occupancy, and that was because the rail crews would come day and night and they would stay for their 10- or 12-hour layover,” O’Neill said, reeling off the amenities tailored to crews’ needs.
“We had 24-hour diners – they’re called Penny’s Diners, the all-American big hamburger and milkshake; no liquor because of the trainmen; no decaf coffee because they have to stay awake – and the rooms are custom-built.… When the trainman comes in at noon in Yuma, Arizona, he can go to sleep; he doesn’t know whether it’s day or night.”
Coal shipments pushed AHIP to diversify, and select-service properties mean railway accommodation now represents just 20% of its revenue.
“We would love to develop that business, but it just doesn’t have the dynamics for us to grow where we’ve grown in the last three years,” O’Neill said.
Instead, O’Neill bought a portfolio of select-service hotels operating under the Hampton Inn, Residence Inn and Holiday Inn Express banners. The properties give travellers comfort without the cost, while O’Neill sees higher revenues without the expense of a full-service property.
“It’s more efficient to deliver hotel profitability,” he explained. “It’s less risky, and you have less focus on food and beverage.”
Business upbringing
The oldest of six children, O’Neill was born in August 1949 during a family visit to Victoria. He returned to the West Coast for good in 1958 when his father, Jack (JJ) O’Neill, traded Winnipeg for Vancouver and launched O’Neill Railway Catering to serve passengers and crews on Canadian Pacific Railway lines west of Manitoba and Pacific Great Eastern (later BC Rail) routes from North Vancouver to Prince George and Fort Nelson and west to Dease Lake.
O’Neill grew up with the business and eventually entered the British Columbia Institute of Technology, graduating from its hotel program in 1972. He promptly took off with his new wife, Beverly – they’re still married after 45 years and three kids, and she still joins O’Neill on hotel inspections – to manage the Gold River Chalet, which would become the cornerstone of Coast Hotels Ltd.
Six years later, O’Neill took the reins of O’Neill Railway Catering and National Caterers Ltd., a venture his father launched in 1959. National became Canada’s largest camp caterer under O’Neill, serving workers from Newfoundland to the High Arctic.
Rob’s brother John had meanwhile joined the family business. When Okabe Co. of Japan bought Coast from the O’Neills in 1988 the brothers remained part of the executive team. All sides went their separate ways in 1991, but by the mid 1990s the O’Neills were back together and in 1997 they launched Canada’s first hotel real estate investment trust, Canadian Hotel Income Properties REIT (CHIP). Today, John O’Neill oversees the family’s management company, O’Neill Hotels & Resorts Ltd., as well as ONE Hospitality Group, which manages the U.S. properties (the brothers are equal partners in the management firms, which operate from offices adjacent to AHIP).
The partnership was integral when AHIP launched in February 2013 with the late Darren Latoski. It stemmed from a deal with Latoski’s Sunstone Realty Advisors Inc., in which Rob O’Neill acquired and managed three hotels in the U.S. on Sunstone’s behalf.
It also brought him full circle, returning him to the railway business as well as the people who backed CHIP in 1997. The experiences underscore the importance of maintaining good relationships in what is, essentially, a people business.
“Canada is a very, very small place,” O’Neill said. “We’ve been successful because people remember that last time we did business it was a good experience for them, especially the Canadian banks. They supported our initial IPO with CHIP REIT 20 years ago, and they really supported us 20 years later with American Hotel Income Properties.”
Jeff Mooney, chairman emeritus of A&W Food Services of Canada Inc., met O’Neill through the Young Presidents’ Organization, which contributed to both men’s formation as business leaders. But O’Neill’s lifelong experience of catering stands out for Mooney as integral to his vision.
“Rob started at the very bottom learning the basics of the business in lumber camps and so forth,” he said. “I think that always serves someone well, because I think if you don’t have the perspective of where the business lives and what the customers are really like … you’re never going to get it right.”
Slowing down doesn’t appear to be in the cards for O’Neill, who rises daily at 5 a.m. and hikes every day with his dogs near his home in West Vancouver. And retirement isn’t on the immediate horizon.
“Not yet,” he quips. “I’m still a young man.” •
