AM&AA Winter Conference 2016 Keynote Address

Today what I wanted to do is introduce you guys. We have a really exciting speaker this morning. Mr. Harris Rosen is the owner of this hotel as well as 6 others, and we've got a brief video to introduce him. We could get that started. I remember it as if it were yesterday. We were walking on the outskirts of the Bowery. I saw a sightseeing bus, and a couple of ladies got out. One of them turned to her friend and said, "So this is how they live." And I had no idea what they were talking about. So we trudged on to school and came back and had a conversation with my mom. And she sat us down and explained that this is not the way everybody lives. There are people who live in little homes and there are trees and there's grass and people play in playgrounds and there are actually soccer fields and baseball fields and people don't play in the street. She said, "And if you don't want to stay here for the rest of your life," Then the way out is education. I'm blessed, right from the Bowery, Fulton Fish Market, Chinatown, to where I am. The more successful I am, the more I can give. So that's how I balance it. How do you teach someone to take a risk? And for those of us who take risk, it's not a risk. Because you know that everything's going to turn out okay, because you're going to make sure it does. You're going to do whatever it takes. If you don't have the money to fly to New York and New Jersey and Massachusetts, you hitchhike. Ask and you shall receive. That's what we tell our salespeople. We want the client, the potential client, to ask and just say yes. That's not very difficult. There's so many things that we're doing, and I think our associates love it. They love the fact that we have a reputation of caring for a multitude of things, not just making money, not just building more hotels. Our people know that there's a tremendous amount of upward mobility in our little company. We had just completed Rosen Plaza. And I was already working on Rosen Center and already dreaming about my resort. And I thought, whoa, slow down. The good Lord has given you more than you've ever dreamed of. It's time for you to start giving back. And so we decided that we were going to give back in a substantial way, and education was going to be the key. So I said, we're going to find neighborhood kids that need help. And we're gonna help them. So the next step was to find a neighborhood. I explained to them what I was going to do, and of course they thought I was nuts. So from 2 years old until graduation from college, they wouldn't have to worry about educational costs at all. And then I think they thought, well, maybe he's gonna start with the kindergarten kids. And I had a feeling that maybe that's what they thought. I said, and the graduating class from Dr. Phillips High School This year, those youngsters who are going to college, I'm paying. Well, everyone went crazy. And so we've done the program for about 19 years. Graduation rates from high school are now at 100%. Graduation rates from college are at 75%. So these are, these are numbers that you don't even find in the most affluent gated communities. My dream is that every single disadvantaged neighborhood in the United States of America have this program. I think the message is: have a dream, don't give up, be honest and respectful, and work your ass off. Please join me welcoming Harris Rosen. We're going to have Danielle Fugazi from SourceMedia do a brief fireside chat with Mr. Rosen. Thank you.

Good morning, everyone. Thank you for joining us today. We're actually really lucky to have Mr. Rosen here. There's We have short time together and there are so many different pieces of this that I want to cover. Before we get into the business part, everybody here is in the deal-making business, so I think that one of the most important things we want to cover is how you grew this business to be what it is today. But before we get to that, just, um, the video— can you just explain to people a little bit? I think you touch on in the video and I'm not sure people really understand about your initiative to actually send all those kids to college.

Well, I think a lot of it has to do with what I mentioned on this video about growing up in the neighborhood I grew up in. I mean, all of the games we played were in the streets— stickball, Johnny Nappone, Bring-a-livio, punchball, slapball. And I'd mentioned that story to you, as I'd forgotten the sightseeing bus and the ladies getting off and saying, so this is how they live. It was a different kind of a neighborhood. And my brother and I didn't realize it was different. And so— Having experienced that growing up on the 7th floor of an apartment complex on the Lower East Side, when I have lived my life and achieved some success and decided that it was appropriate for me to say thank you, God, and to demonstrate my appreciation by helping some folks that needed a helping hand. It was the underserved community that I was focused on and education because mom and dad used to have frequent conversations with my brother and myself about doing well in school and if we ever wanted to leave the neighborhood. And so when I had that opportunity, we selected a neighborhood that was really struggling very badly. Crime, drugs, prostitution, graduation rates from high school probably around 40%. Mobility was about 80-85%. The neighborhood was turning over because it was so bad. And so we selected that neighborhood, which was extraordinarily challenging, And we put together a little template which we hoped would create a whole different perspective there. And we said we would focus on education. And so with a couple of experts, education experts, early childhood education experts and high school/college experts, In a very short period of time, we said if we start education at 2 years old as a preschool education, preparing these youngsters for kindergarten and elementary school, and then if we offer a free college education to keep them enthused and excited and keep their parents engaged, Maybe it'll change the neighborhood. Well, what we've discovered after 23 years is that high school graduation rates are 100%. Crime in the neighborhood is down 65%. 400 kids have graduated from college in the last—

I also want to just say, I mean, I read this yesterday. You're not only just paying for their college, but you're paying for books. I mean, everything that they really need to stay in school. Their food, there was a meal plan, everything.

Everything. They have no cost whatsoever. And the neighborhood has changed. So what we started as an experiment, after 23 years, it has become apparent that whatever we kind of put together seems to work. And it's not terribly complicated. Every 2-, 3-, and 4-year-old, free preschool. And we created little preschools right in the neighborhood. So mostly a single-family neighborhood, single-family home neighborhood. And at our expense, we created within the house an area where the maximum of 6 youngsters per school would be able to attend school. And the caregiver, often the owner of the house would be certified and would receive certifications, and this new template would continue forever. Now, I am asked on occasion, when is the program over? And what I say is that the program is over when the average home is selling for $1 million, then I'm out of here. And so everyone kind of chuckles and says, well, I guess he's going to be here for a long time. Although home values have increased from about $40,000 a home to about $150,000 a home. Wow.

So I want to keep this interactive. If anybody has any questions, you can Feel free. I'll take— we'll take questions throughout. But so turning our attention to your, to your hotel business, can you explain the other thing I know about you? And we talked about a little bit is your debt-free policy, which is kind of interesting in this for this group because, you know, they use leverage to get their deals done a lot of times. Can you just explain a little bit about how you actually you started your business and how you use that now, how you choose not to.

Well, I went to Cornell University, then spent 3 and a half years with Uncle Sam in the Army overseas, and then started my career and wound up in Orlando working for Disney. Was head of hotel planning for Disney, and we opened the Contemporary Resort, Polynesian Resort, Fort Wilderness, and the Golf Resort, and the hotels did very, very well. I had not received a pay increase since I started for Disney until Disney opened in October of '71. And it was now a year past opening, '72, moving on to '73, and I was getting a little bit concerned, but I was called in by my boss's boss to have a meeting. And the first words were, Harris, you've done a great job for us. And now in my mind I'm wondering, is it $5,000 a year increase? Is it $10,000? I mean, is there a new job? And then a word that I can still hear so clearly. The word was "but." And I couldn't understand what "but" had to do with this. And the sentence was, "But we do not believe you will be a successful Disney executive. And so, of course, I was stunned, but angry also. And I must confess that every once in a while, the Lower East Side pops up. And I said something that was inappropriate. I said, so I won't ever become a Disney executive Is it because my ears are too small? Meaning that I wouldn't look like Mickey Mouse. And the response was, Harris, that's the kind of bullshit we're talking about. You don't respect Mickey. So I was fired essentially for not respecting a rodent, and not even a real one, a make-believe one. So anyway, that had been the third job that I'd been fired from. And so I— I said to myself that I don't care what it is that I will do with my life, but I'm not going to work for anybody else. And that's when I started looking for a hotel. It was 1973-ish, '74, and there was an oil embargo. Virtually every hotel in Orlando was in severe financial difficulty. But I thought somehow that I would be able to run a hotel successfully, even during very, very difficult conditions. And I found a little motel, and I went inside and asked if the manager or the owner was there. And the young lady said, "Yes, Mr. Morgan is here. He's the owner." So she asked me to sit down in the lobby and I did. And within a relatively short period of time, a short, stocky fellow came walking towards me and I got up. And he said, "I'm Jim Morgan and I'm the owner of the hotel." And I said, "I'm Harris Rosen and I'm—" perhaps interested in buying a property. And he took a step towards me and wrapped his arms around me and hugged me so tight that he actually cracked one of my ribs. And he said, God has sent you. And I said, oh boy, I'm in trouble. So anyway, that That led to further conversations and finally with a lender out of Connecticut, Travelers out of Connecticut. And at that meeting, I was asked about my background and he was very impressed with my resume. And then he asked me a very strange question. He said, "Harris, how much money do you have in the bank?" And my initial thought was it really isn't any of his business. But because I was so new at this, I thought maybe he knew somehow. So I said, "Sir, I have $20,000." And he extended his hand. I shook it and he said, "That's exactly what the down payment will be." So on June 24th, 1974, I walked into what was then my office and I cried because I believed I had just done the dumbest thing a human being could do. I didn't have any money. I assumed a $2 million mortgage. The hotel was running at about a 20% occupancy, negative cash flow of about $200,000 a year. And that's how I started my career. I did have a plan though, and my plan was to go to New York and New Jersey and Massachusetts and visit some of the top motorcoach companies and give them a little business card and ask them to write a room rate that I would honor for a year, any rate they wanted, as long as they would bring their buses to me. Because buses were still buying gas, individuals were having a I had a tough time doing that. And they thought I was a little bit crazy. I still have the cards. The rates ranged from $7.25 a night to $8.25 a night, and I visited about 6 of the top motorcoach operators. They were so incredibly kind to me. They would drive me to their competitor because they knew I didn't have any money. I didn't have any money and I didn't, I couldn't afford a taxi. So they would drive me in their buses to their competitors. And I even went from New York to New Jersey, from New Jersey to Massachusetts that way. And the last visit was a group in Massachusetts called Paragon Tours. And the Pendlers were the owners. And they knew I was going to hitchhike back. And they had me wait a day. And they found a couple. That was heading to Florida who agreed to drive me down there. They were so kind that they were my guests at my little hotel until they passed away several years ago for a month as my guests, just thanking them so much for that trip back. So that was the beginning. And the buses started rolling in. And I did about— of course, I lived in the hotel, and I did about 7 jobs to save a minimum of $200,000. I actually saved about $325,000. I was a gardener. I was a general manager. I was an executive housekeeper. I was the director of sales. I carved all of the meat at night. I was a breakfast cook. I was head of security, me and the best security officer I ever had, a 95-pound German Shepherd named Tintin, who's buried in a beautiful coffin not far from my office. Now, there is a God because about 9 months after I purchased the property and the buses were rolling in and I was stabilizing myself financially, the embargo was lifted and we've never really looked back. A year to the day after I acquired the first property, I acquired a second property on June 24th, 1975, and worked a deal out with the lenders so that I didn't get a management fee, but I would manage the property and all of the cash flow would go back to the lender. They would match it. At the end of 5 years, I would have the first right of refusal to either purchase the property or to give it back to them. Or if I paid off the debt within the 5 years, I owned it free and clear. I paid it off in 4 years. So in 4 years, I went from being fired because my ears were too small to owning two hotels, one debt-free. That's amazing. And I was well on my way to realizing the American dream. And I say that because my grandparents came from Eastern Europe, from Belarus and from Austria-Hungary, and settled in the Lower East Side where my mom and dad met each other and got married and had me. And so here we are. From Russia and from Austria to now me owning 2 hotels. It was just really quite astonishing.

It's a great story. I want to give the audience an opportunity if anybody has any questions. Otherwise, I'll ask another question. It's hard to see with the lights. So when you look at the future, I mean, so since those two hotels, right, you have five more. You've added five more.

Yes, in the 42, almost 42 years we've been in business, we have added on to those properties. The original property is 256 rooms. It's now 728. The second property was 251 rooms. It's now 315. But then we purchased some land and built some properties and then moved into the convention business. And what I remembered was that the debt-free hotel generated such a nice cash flow, and the property that had debt was encumbered by that debt. And I do remember a conversation I had with my two granddads who really lost everything during the Depression. One had a little wooden barrel business and the other had a tiny little restaurant, and they lost everything in the Depression. And they sat down on either side of me, one evening, and I was about 6 or 7 years old. And they said, boy chick, very, very thick Eastern European accents, you're going to be a businessman one day. You have something very special in your genes. I didn't really know what they were talking about. But never borrow money. So I went to bed, and mom would tuck my brother and me into bed. And she said, Harris, why don't you have your pajamas on? Why do you have your jeans? I said, because Grandpa Sam and Grandpa Harry said I had something very special in my jeans. It's something different that she tried to explain to me, but I did not understand. But I did understand don't borrow money. And so, I mean, I'm— it's not evil. It's necessary. I had to do it. But we did work very hard over the years to pay off all of our debt. And we have no debt on this property, no debt on our 7 properties. It is a good feeling, and it does enable us to be a little bit more competitive because we don't have to worry about principal and interest payments. So philosophically, it's worked very well for us.

So when you look to the future, what do you think about the business?

Yeah, that's really— that's interesting. What I've discovered about— people who have this terrible entrepreneurial gene is that we are seldom satisfied. And so I, instead of being angry at myself, I've reconciled myself to that philosophically. And so one hotel would have been wonderful for myself and my wife and four children. We would have lived quite comfortably. Two, more than comfortably. Seven is absurd. But I can't control that urge to do more and more. We have our own insurance company. We're self-insured. Insured. Our insurance company now has about 170 clients. We have our own IT company, and our IT company, which is relatively new, has now about 90 clients. And we are contemplating adding more rooms to this property, about 640, and we're in the very early stages of working with the county to get everything done. I don't know why. It's crazy. It's almost obscene. But I love it. And I'm going to continue doing it until they take me out of here feet first. But what I've tried to do, and I think I mentioned that a little bit in that video, I tried to use the success that we have achieved and that I have greatly benefited from in a positive way. So we, we started the Rosen Foundation about 25 years ago. We built the Rosen College of Hospitality Management, which is now the largest hospitality college in America and is part of the University of Central Florida. We recently built a Jewish community center. We have a $5 million scholarship endowment at University of Central Florida. We do a lot of work in Haiti because a third of our associates are from Haiti and we love them dearly. And we're contemplating building a school in Haiti now. And recently we adopted another neighborhood and we're going to introduce our Tangible Park program there and it's 6 times the the size of Tangello Park. And so I'm doing that to kind of balance my life. So on one hand, I'm driven to keep expanding and growing and doing well. And now, our little foundation is engaged in helping as many people as we can. And so as a human being now, I'm really quite content. I don't chastise myself for thinking about adding more rooms or building More facilities. We just opened a kosher kitchen. It's crazy. But the Rosen Plaza now has the largest kosher kitchen in maybe the state of Florida. We spent $4 million on it and booking kosher business like crazy.

Who needs that? Well, there's a market for it, obviously.

I know there is, but that's this crazy gene that's driving me crazy. And so now, in my case, and I'm not suggesting it's for everyone, but I do have some balance. We're doing good stuff, and I'm so proud of that. And we are generating nice cash flow, and I'm very proud of that. So for the time being, I'm OK.

It's an amazing story. Thank you so much for your time today. We really appreciate it. Thank you.

Thank you so much.

You're terrific, really terrific. I applaud all your hard work.