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February 22, 2001

From broker to owner: Craig Schafer tells why he made the switch

By CRAIG SCHAFER
Special to the Journal

I never considered that hotel brokerage was going to be a life-long ambition for me. I also didn’t expect to be a broker for more than 15 years when I joined Colliers International in 1985. Having recently retired as president of Colliers International Hotel Realty to join the ranks of a full time hotel owner, I’ve had the opportunity to reflect on and experience the differences between acting as an intermediary and an owner.

Craig Shafer
Craig Schafer left the hotel brokerage business to purchase the Edmond Meany Hotel, behind him.

My goal was to be an owner/developer, not a manager, broker or advisor. Those steps became my route. After graduating from hotel school at Washington State University, I joined Westin Hotels’ management program. After a few years working 80 hour weeks, making $700 a month and observing hotel general managers bending over to pick up gum wrappers in hotel lobbies, I saw the light and quit.

From there I went on to hotel operation and development consulting after obtaining my MBA, and I began to see light at the end of the tunnel toward ownership. Consulting was a great job because it allowed me to interact with the key principals involved with hotel ownership and development. However, it was still a small piece of the pie in terms of the start-to-finish process of development, renovation or ownership.

When I learned of the hotel brokerage opportunity in 1985 with Colliers, I jumped at it. After five years of consulting, I was ready for a change and brokerage seemed like an ideal opportunity to get one step closer to ownership, both monetarily and experience wise. Then came my first day: an empty office (small window), with a telephone and the Yellow Pages. After fantasizing about big deals and commissions for a few minutes, I took a deep breath and made a to-do list. I was just a little nervous.

My reasons for getting into real estate brokerage were simple; I did not see anyone in the marketplace providing hotel brokerage service who had real experience in the hotel industry. But some people were making money because they were there.

Hotels are a management-intensive business. The value of the real estate has much more to do with the business than any other criteria. I believed that if a broker understood that business, he or she would be much more effective than the generalist who sold apartments one year and office buildings the next.

I was right. After opening eight offices throughout North America, working for a great company, traveling overseas and working with some great people, I decided to hang it up.

From my perspective, going from brokerage to ownership can be a fluid transition. The experience can be far different for others, however. What follows are my observations on several issues. The categories I’ve chosen to compare are things that are important to me and those that had the greatest impact on me.

Money: Most, if not all people go into real estate brokerage because they think they can make good money. But, as in most types of sales, 20 percent of the people make 80 percent of the money. So, most real estate brokers make an OK living. Money, to me is the icing on the cake, the reward to buy the trophy. The process of creating the transaction is really as satisfying.

In commercial real estate brokerage, particularly investment sales, the extreme and uneven flow of income forces disciplined brokers to keep conservative spending habits. Big hits are rewards that allow you to step up and make bigger monetary commitments, whether they be a bigger house, another car or other real estate. Many times this is done with more cash and with less financial leverage by those who are conservative and disciplined. I’m sure that money is an important factor to most real estate owners and developers. For me, money combined with security, control and project creation far outweigh the positive attributes of real estate brokerage. I find the stress of personal financial risk as an owner is far less than the stress experienced as a broker who cannot control the final outcome of a deal.

Player versus referee: As a broker, I always felt that my role was more of advisor, coach or referee. Owners and developers are the true players in the field of real estate. I’d much rather play than observe, encourage or act as a mediator.

Time: With real estate brokerage, time is the one commodity that everyone in the field has the same amount of. What they do with your time is what sets brokers apart. The great thing about brokerage is that you call most of the shots about your time. It’s up to you how you spend your day. I always felt like there was really no end or beginning to a day. There was always something more to do to create more value. As an owner, the pace is more varied, depending on the cycle of your project. I feel there is more time to reflect and analyze, rather than worry about which deal is getting away from you, what you competitors are doing and deadlines impaired by clients.

Respect: I feel that I get a lot more respect as an owner. I am greeted differently, my phone calls are returned more regularly and people are more often “selling” me versus me “selling” them.

One of my biggest pet peeves about the real estate brokerage business is the ease of becoming licensed. Virtually anyone can get into the business. The lack of barriers to entry is a double-edged sword. On one side, most of the competition lacks education, experience or intuition. On the other side, weak competitors get in your way and taint the industry, perpetuating the “used-car salesman” side of the business. Barriers to ownership are much greater. Money or lack thereof may be the primary hurdle but, other variables including reputation, track record and experience are nearly as key.

Abuse and self-abuse: I can say one thing as an owner: I certainly don’t feel as abused. Principals, seem to use the broker as the “whipping person” during a deal. It seems to me, the perception that commissions are not always directly justified by the broker’s effort or knowledge allows some to feel it is OK to “beat up the broker” for the sport of it.

On the other hand, I was surprised at how many times I heard stories about brokers caving to get a deal done. I think I can count on one hand the number of times that I reduced my fees from the agreed upon contract rate. In those cases, it was not because the buyer or seller said that the deal wouldn’t close if I didn’t agree to reduce my fees. That seems to be an irrational threat that strengthened my resolve not to give in. Brokers who do, are generally desperate and are doing a disservice to the industry.

I liked the brokerage business. I learned a great deal, met and worked with some great people and made some money, However, I love being an owner. I like calling the shots and being more in control of the destiny of the deal and the project. I would only go back to hotel brokerage for one reason now: to selectively work with the people I enjoyed working with, those relationships where there was mutual respect and lots of fun. That is what I miss most. But for now, I’m having fun just being an owner.

Craig Schafer is the owner of the University Tower Hotel and the former president and founder of Colliers International Hotels.


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