Doug Anderson

May 2, 2011 Daniel Vance

Minnesota Hospitality Hall of Fame inductee and successful hotelier seizes the day over a long career.

Doug Anderson lucked into it. He would be first to tell you.

But nearly all businesspeople luck into opportunity. Connect Business Magazine over its 17-year history has featured hundreds of businesspeople that happened to be in the right place at the right time, including some of the more financially flourishing, such as Bill Bresnan, Tom Rosen, and Glen Taylor. You also could add to that list southern Minnesota’s greatest businessperson, Sir Henry Wellcome, who Connect Business Magazine featured posthumously in July 2009.

This isn’t a rare phenomenon. Lucking into opportunity repeatedly happens to every businessperson—and with some, every day. But it’s the very best who seem to have an innate ability to see, size-up, seize and build that opportunity into an economic skyscraper benefiting everyone.

For his industry, hotelier Doug Anderson at times has shown this ability. He owns and operates North Mankato’s only hotel, Best Western; City Center Hotel in Downtown Mankato; and Holiday Inn Express near River Hills Mall. His three hotels employ more than 225.

In 2009, the Minnesota Hospitality Hall of Fame inducted Anderson and could have done so on one accomplishment alone. If not for Anderson seeing and seizing opportunity and becoming an advocate in St. Paul, the state legislature in the ‘70s probably would not have dedicated the three percent lodging tax toward funding local convention and visitor bureaus that promote tourism. So Anderson ought to receive at least a modicum of credit for Minnesota’s explosive growth in tourism—an $11 billion industry now employing 238,000, according to an Explore Minnesota website.

But he hasn’t been a one-hit wonder. Now age 72 and showing no signs of slowing, Anderson in this interview relates a number of success and sorrow stories that surprise.

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You grew up in a family that eventually became very active in the hotel industry.
My brother was two years younger than me. Because I took a couple hiatuses from college, we ended up graduating from Gustavus Adolphus at the same time. During our sophomore year in 1960, we went home for Thanksgiving dinner. My dad had a business he started from scratch, which involved a number of Shell gas stations around Willmar and a large fuel oil business. Both of us had worked in the business pumping gas. At Thanksgiving dinner, my dad revealed he had a good offer to sell his business from some men working for Shell in St. Paul. He wanted my brother and I to make a decision literally that day on whether he should sell or keep it for us to run.

He let you two decide?
He knew what he wanted, but didn’t want to make the decision without our input. He had started that business from scratch, built it into a successful business, and would have liked for us to continue it. We finished dinner, talked about it together and with him, and told him he should sell.

What was your reasoning?
Owning that business wasn’t the kind of challenge we were interested in. It wasn’t easy for him to accept his sons didn’t want to be involved in a business he had spent his life building. So he sold. He dabbled in a few things for a couple years before buying a motel in Willmar—perhaps 12 units. Someone managed it for him.

Then he met a gentleman building small apartment buildings in Fargo and my dad asked him to build two for him in Willmar. This man also co-owned a Holiday Inn going up near Fargo. The ownership group at that hotel was looking for other hotel locations in Minnesota. They had property in Rochester, Minnesota. My father learned of it and expressed an interest in becoming financially involved and ended up purchasing a 1.5 percent share in the Rochester Holiday Inn. One and a half percent of a 120-room hotel wasn’t a big deal.

Before, your father had included you in on the decision to sell. Did he include you in on this decision to buy?
Not really. We were at college in St. Peter and he was in Willmar. His financial investment was a relatively small amount, perhaps only a couple thousand dollars. The Rochester hotel literally opened the day President Kennedy was assassinated. The ownership group had a Memphis lawyer, the man from Fargo, my father, and two brothers from Fort Smith, Arkansas. Except for my father, all these men had substantial businesses going already.

They had hired a Texan to manage the hotel and he stayed until February 1964. He told the owners he was going back home because he had all the Minnesota winter he could take. So the owners were left without anyone to run it. Back then, there just weren’t a lot of people experienced in running full-service hotels. Then my dad told the other owners he would like to run it. Simultaneously, he got hold of my brother and me—we had just graduated and were working in Minneapolis. He told us he had this hotel deal and needed us to help him run it.

So you had the management contract?
He leased the hotel from them, with an option to buy. That’s how we got into the business.

Had your father not met some guy building apartments in Fargo, you likely wouldn’t be in the hotel business today.
It wouldn’t have happened. I have read some of the cover stories you have published in Connect Business Magazine. Most people you write about had career paths and goals. I didn’t have a career path drawn out. It just happened.

And if they had originally hired someone from Minnesota rather than Texas…
It wouldn’t have happened either. (Laughter.) A lot of circumstantial things often determine career paths. By choosing the hotel business, my father did get something he had been looking for: he had wanted us to work for him and had wanted a family business. In doing it, he also found something we thought attractive.

If not the hotel business, what would you have done in life?
I would have been involved as a retail manager or a salesman, which is a lot like what I do now.

How well did you three work together?
Really well. The man building the apartments in Fargo also owned part of a Holiday Inn being constructed near Fargo. He needed someone there to receive furniture, fixtures, and equipment before the hotel opened. We had just graduated from college, neither one of us had jobs, and so my brother went to work for him—and later as a desk clerk for a short while. My brother got a taste of the hotel business there. My dad had a taste from owning the 12-unit motel. As for me, I really didn’t have any particular experience. In Rochester, my dad was the general manager, my brother the front desk manager, and I eventually became food and beverage manager.

You stayed in Rochester and with that hotel until 1969, when you became involved in starting a Holiday Inn in North Mankato, which later became the Best Western.
My brother stayed in Rochester and I moved to Mankato. Although that brother has since passed away, another brother of mine now runs and owns that hotel in Rochester. I never had any financial interest in Rochester. I worked for my father.

To put himself in the position of getting that lease originally for the Rochester hotel, my father had to hock everything he owned. In 1968, my father exercised his right to purchase it and had to hock everything again. He wasn’t in a position to build another hotel, but one of the co-owners of the Rochester hotel, Lloyd Hobbs from Fort Smith, Arkansas, had stacks of money and more real estate than I can ever put my arms around. We made an arrangement similar to the deal in Rochester, in which we would lease the North Mankato hotel from Lloyd and I would manage it with an option to buy. So we started DDD Hotel Corporation, which stood for Don, my dad, Dean, my brother, and Doug.

What did you learn from them about business and life?
My dad’s expectation was you had to put a lot of hours into a business to make it work and at times you had to make hard decisions and take risks. That was part of the game—and what I picked up from my dad. He wasn’t college educated, but one of those guys you ran into in life who was really smart yet never had a chance to go to college.

My brother was civic-minded. He was liked by everyone, head of the student council in high school, and was senior class president. He played basketball. I was always in the shadows and, in comparison, didn’t do much. What I gained from him was the sense of being able to compromise in a situation in a way that moves everything forward. He was a consensus builder.

You built the Holiday Inn in Downtown Mankato in 1979. Did you use the same template as before, that is, having someone else help with the upfront money and then leasing?
No, by that time, we were in a better financial position. We still have a partner in that hotel: Chuck Atwood of Atwood Realty. He isn’t involved in day-to-day operations.

Right in the middle of perhaps the worst hospitality downturn in decades, just a couple years ago, you opened your third hotel, a Holiday Inn Express near River Hills Mall. Why? Was it because you thought the Walmart distribution center would be opening soon?
The hospitality industry has moved to an emphasis on rooms-only hotels. We had full-service hotels in Mankato and North Mankato, so we were out of sync with the industry. In the hotel business, when you start adding a restaurant, bar, and meeting rooms, what you are really doing is trying to enhance the sleeping room business. You aren’t building a bar because you want to be in the bar business, for example; you’re doing it because you think it will sell rooms. Typically, rooms are the cash cow of the business and the rest is an amenity—that sometimes can cost you money.

In late 2005, the person that sold franchises for Holiday Inn said he had someone wanting to build a Holiday Inn Express in Mankato. Generally, franchisees have first right of refusal, even though it’s not written into the contract. These people were building rooms-only hotels in the Upper Midwest at a ferocious pace. We were put into a defensive position and because of competitive pressure had to do something we wouldn’t necessarily have done.

Yet the timing of it could have been great had the Walmart distribution center opened its doors earlier—as many people had expected.
If Walmart had opened and the economy hadn’t tanked, it would have been beautiful. By 2007, I found a good location for a Holiday Inn Express and started negotiating for land. I bought the land, and the franchise, and hired an architect, I&S Group. By early 2008, we were ready to go, money was available, the price was right, and we broke ground. Then the economy tanked in late 2008 and we were too far along to stop. The hotel was finished in summer 2009. The hotel is operating now a little better than its competitive set of hotels in the Upper Midwest. We don’t know what the local Fairfield Inn and GrandStay does, for example, but we do know what they do as a group.

As an industry, isn’t 50 percent occupancy about average?
It’s just barely 50 percent. The good news is the Holiday Inn Express is doing what you would expect a new hotel to do in any market. It slightly outperforms its competitive set. What has happened is the competitive set pie has shrunk. (Laughter.) So you say, “We’re doing great compared to our competition.” But it’s still not enough to make it a satisfactory investment.

It seems Mankato/North Mankato is in a dilemma right now because it needs more hotel rooms to attract more and larger conventions. But you need more conventions to build more hotel rooms. Is there room enough for another hotel?
Another one, from where we are at right now? I don’t think there is anything in the wind downtown. The city owns enough of that hotel (Hilton Garden Inn) down there they don’t need to own another.

Now tell me what you really think.
(Laughter.) Another hotel has been considered for near River Hills Mall and Scheels—a Marriott Courtyard. That project has been delayed. The people developing it also own AmericInn near MSU. Dave Peters is a really nice guy and smart. He comes from a family that knows how to make good decisions. Right now, I’m just guessing, but with the economy the way it is, he is probably waiting. He didn’t get started and then stuck in the deal like I did. My sense is if Dave Peters wanted to build, financing wouldn’t be a problem.

In 2006, you made a public charge that the City of Mankato had become too cozy with a development group behind the new Hilton Garden Inn. The city manager, in a newspaper interview, then turned the tables on you and said your downtown hotel had received more in subsidies over the years than the Hilton Garden Inn. What did you learn from that experience?
I don’t think my view has changed. What we ended up with was more hotel rooms in Downtown Mankato than you would expect the civic center could support. So that’s a dilemma we have. Now they are talking about building enhancements to the civic center because we need to develop more attractions to fill these rooms.

Let me tell you how Downtown Mankato ended up with what is now the City Center Hotel, formerly the Holiday Inn. When we built what is now the Best Western in the late ‘60s in North Mankato, Mankato lost its hotel presence. In the mid-‘70s, the City of Mankato wanted a downtown hotel. They hired a consultant to do a feasibility study and sent the study to developers around the nation. They said they wanted to build a hotel and had land available. They didn’t receive any interest. No one was interested.

In 1975, Mayor Herb Mocol came over for lunch one day. He said, “We need to get a hotel built for Downtown Mankato and I’m wondering if you are at all interested in becoming involved in building one.” I read the feasibility study and worked on the nitty-gritty with City Manager Bill Bassett. I told him it was a legitimate feasibility study, but what the feasibility study had not included was a provision for parking. They had a hotel on a piece of ground and didn’t have parking figured into the study. To make the deal work, the City built a parking ramp next to the hotel and a parking garage underneath. That was the help I received from the City.

Has having another downtown hotel created incremental growth?
It would be hard to say no. The convenience of availability leads to having more people. I sat on the committee helping establish the civic center. The people on the committee kept saying I would benefit most from a civic center. My argument was that a civic center would produce incremental growth in hotel room nights at best only half the weekends a year and for only one night on those weekends. In other words, it would mean only an additional 26 nights a year. There aren’t many weeklong events held in Mankato. Even Rochester is mostly only a one-night city for events.

So how much of your business can directly be attributed to the civic center? Five percent?
About that. There are several things working against Mankato in terms of attracting conventions. One is we don’t know until July or August what Friday and Saturday nights MSU will be hosting hockey games.

And aren’t many conventions booked a year or two in advance?
You have this figured out. So there is a huge amount of pressure in booking a convention because we can’t promise hotel rooms during hockey season. Even wedding receptions are sometimes booked a year or two ahead. We end up in a position where we have to take a chance with some conventions we have been doing business with for years.

Every hotel occupant you have pays a lodging tax that goes directly to a local convention and visitor’s bureau.
Let me tell you how that tax started. In the ‘70s, the president of the Mankato Chamber was interested in having a hotel room tax as a source of revenue for his organization. I listened, studied, and realized the legislature was going to enact a hotel tax. It was inevitable. We went to the state legislature and pushed for enabling legislation that allowed any city in Minnesota to impose an up to three percent sales tax to be used for promoting that specific city to tourists. I knew there was going to be a hotel tax anyway, and my idea was that if I got in front of the wave, I could probably get that hotel tax dedicated to promoting tourism instead of having it go into the general fund.

Last October, you chose not to renew your franchise license with Holiday Inn for your downtown hotel. It is now the City Center Hotel. Take me step-by-step behind your reasoning. You could have kept that as a Holiday Inn even though you were opening up a Holiday Inn Express on the hilltop.
Exactly. Before converting the North Mankato Holiday Inn to a Best Western, at one point I had two Holiday Inns in town. So having two wouldn’t have been something I hadn’t done before. Here’s the deal: When you buy a franchise—this is how I put it—you buy a tube that feeds reservations from the whole nation to your hotel. And that tube is only so big. If you have two Holiday Inns in town rather than one, that tube is still the same size. If you have a Best Western and a Holiday Inn, which are two distinct tubes, you still have two tubes combined that are bigger than just one for two Holiday Inns.

So rather than change to a private name, like what you have, why not go with another franchise?
Suffice to say we could have gone with any of several full-service hotel franchise organizations. I chose not to do it. For one reason, a rapid shift is going on in the hotel business. Most reservations used to come from a central reservation system, but those reservation offices aren’t producing what they used to produce. The Internet is rapidly becoming a major reservations source. The individual franchisees now, like the independents, have to have their own Internet presence in order to make up for the shift in reservations away from a central reservation office.

So that trend is happening so quickly that in several years there won’t be much done centrally?
That is what I’m betting. And I don’t know if I have made the right bet.

Yet don’t you have the option of going back to a franchise if your bet doesn’t work out?
Yes. So far, we’re still trying to figure out the effect. Also, for the Downtown Mankato hotel, we don’t have to pay the annual franchise fee, which is more than a quarter million a year.

So you would have to be doing a quarter of a million less for a change not to pay?
It’s big money. So we’re playing an expensive hand of poker here. (Laughter.)

In the business community, who are your best friends?
Business-wise, I get along really well with Keith Boleen of Frandsen Bank & Trust. He is someone I can talk to and lay it out on the table and not feel I’m going to get taken advantage of. I have become acquainted with people at I&S Group, including Chad Surprenant. Other people I know well are Dean Doyscher and his wife, State Sen. Kathy Sheran. I have asked her to help me present certain issues to the city council and Dean has helped in different venues. But there have been some situations where Kathy has had to say, “I can’t be on that side of the fence with you.” (Laughter.)

Every few years, the Vikings seem to show hints of wanting to pull out of Mankato. How important is training camp for your business?
It’s more important now than 15 or 20 years ago. Back then, we would fill up for training camp and have to displace business to other hotels. But now, with the economy, we get all the increment out of it. It’s more important. I suppose that’s a function of both the increasing number of hotel rooms and falling demand.

You have visited Belize and Curt Fisher’s hotel, the Blue Tang Inn?
It’s on a small island off the coast from Belize City. I was in Belize on vacation and realized while there this was where his hotel was. I asked around, found it, and had lunch—just surveying the scene. It was very different.

In what way?
It was very informal. As I remember it—and I don’t know if it has changed—the streets going through San Pedro near the hotel were made of sand. People walked barefoot down the street—little streets, like the kind you might see in an ancient European city. There aren’t any stoplights. The hotel is small. It doesn’t have blinking lights. It’s a neat little hotel and I think he really enjoys it. I know he and his friends get there often.

Do you have children?
I have two in Seattle. When moving to Mankato, I was married with two preschoolers. My wife died a couple years later in 1972 and so I was a single parent for a long time. When she died, my daughter was in preschool and my son was in first grade. I spent many years trying to balance family along with the demands of the hotel business. I worked in the hotel every day of the week at least some part of the day.

Can I ask how she died?
She committed suicide. I have spent an awful lot of time trying to figure out why people commit suicide and have found out that’s an unanswerable question. In the mid-’80s, I was spending an awful lot of time spinning my wheels with incomplete answers and needed someone to help direct me to some conclusive thoughts. I’d had a busy life until then running the hotel and doing things with my children and so didn’t have time to get really down on life. There was just too damn much stuff to do. But by the mid-’80s, they had graduated from high school and I had more time to sit back and look out the window. I started thinking about what had happened and wanted to clean it up.

I would imagine somewhere in your mind you blamed yourself.
Everybody going through something like that does. You need to figure out—you can’t completely absolve yourself, but yet you can’t take complete responsibility. I was a part of her life, obviously. But the most important thing for me in the mid-‘80s was how to put myself back together and keep going—and keep the memory of my wife going for the children, too. My kids are out in Seattle. I visit them quite a bit, but visit my daughter more because she has two children, my grandchildren.

Any plans for them to return and take over?
I have not heard any such interest from them. And I haven’t asked. My son-in-law is a mechanical engineer who has worked for the Department of Defense since leaving the University of Minnesota. He is where he wants to be. He loves the technical part of his work and has turned down promotion opportunities that would have moved him into administrative roles.

I don’t have any plans to sell. (Laughter.) A few years ago, I thought about getting these hotels ready to sell, but became involved in building another, the Holiday Inn Express. I haven’t thought along the lines of selling for a while. Eventually I will, but not yet.

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Getting to know you:Doug Anderson

Born: September 9, 1938.

Education: Willmar High School ’56; Gustavus Adolphus College, B.A., Business Administration, 1962.

Organizational involvement: Minnesota Hospitality Hall of Fame (2009 inductee), Minnesota Lodging Association, Minnesota Hospitality Association, Explore Minnesota Tourism Council (former member), advisory board of International Association of Holiday Inns (former member), and Governor’s Task Force to investigate fire marshal fees (former appointee).

History Channel

CONNECT: Last issue, for our cover story, we featured Anne Makepeace of New Ulm. She has been helping that city leverage its history to bring in tourists. You have been active working with the Blue Earth County Historical Society. Do you think Mankato could better use its history to bring in tourists?

ANDERSON: I have often thought if someone could figure out a way to make the Dakota uprising into an event that could be told in a respectful manner—that would be one possibility. I have been to Branson, Missouri, and seen there a re-enactment of a pioneer story. They re-did this story every night and people came from all over. Fifteen miles away was a nightly Christian passion play. What happened during the Dakota uprising should be preserved for future generations.

CONNECT: In some ways, it defined Mankato.

ANDERSON: Let me give you an example of a story that could be told. A lady working at the Holiday Inn had great-grandparents who lived on a Lake Jefferson farm. The family still owns it. They lived in a log cabin. They had an informal agreement with the Indians in that area. The Indians would bring them venison and rabbit, and the great-grandmother would teach the Indians how to bake sourdough bread and gave them other things she had made. When the Dakota uprising took place, the great-grandparents thought they had to leave the area or be killed. They were packing up their belongings and heading to Mankato when the Indians they befriended stopped them. The Indians said they wouldn’t survive a trip to Mankato. The great-grandparents went back to the cabin. The Indians protected them.

CONNECT: In general, stories like that of reconciliation haven’t, aren’t, and possibly could be told if done respectfully.

ANDERSON: You could build heroic stories out of it—like the one I just told you. The problem is this would take people better adapted to doing this kind of thing than me. It needs people passionate to get it done.