The L.A. education of a savvy hotelier

Kenneth Fearn Jr. credits his good fortune to lessons he learned growing up in Los Angeles.

His parents “taught me that you’ve got to protect your good name and your credit at all times.” The Jesuits at Loyola High School “taught me to question everything.”

“I was kind of a sponge,” Fearn recalls. “I could see people who created better economic situations for themselves. That’s exposure that you just don’t get very often no matter where you are, particularly if you’re a minority in South-Central L.A.”

Today, he says, he still follows rules he learned early on: “I owe no one anything. We run our business like that too.”

Fearn, 41, is managing partner of Integrated Capital. It’s a private equity group that’s building a reputation as a savvy hotel investor with a knack for spotting underperforming properties and turning them around. As an African American he stands out among upscale property owners who usually reflect their industry’s Continental roots.

“Historically it’s been very European, very WASPy,” Fearn says of the profession he chose. It doesn’t bother him in the least. His parents, he says, “were absolutely dead-set that race should never be an issue preventing you from doing anything.”

Hilton Hotels Corp. was the first to do business with Fearn, selling Doubletree hotels in Bakersfield and Modesto to Integrated Capital in 2004. (Hilton and other big chains usually don’t own the individual hotels that bear their brand names; the chains retain some control over operations.)

Fearn’s plan was to renovate the properties and reposition them as higher-end hostelries, and it worked, he says, with his company going on to raise the room rates by more than 10%. Fearn, who keeps most financial details secret, says Integrated Capital recently sold the Modesto Doubletree for 43% more than it paid.

The West Los Angeles firm has been busy, recently acquiring hotels in Denver and breaking ground on a Residence Inn in Maryland.

After graduating from Loyola High, Fearn, an only child, went to UC Berkeley and planned to go to law school. But in his last year of college, his father, Kenneth Sr., a facilities planning supervisor for the Los Angeles Unified School District, died. His mother, a cafeteria cook for the district, was alone.

“I suddenly realized I needed to find a real job,” he says. “I needed to be close by my mom.”

He went to work in a two-year training program at the Los Angeles office of investment firm Capital Group Cos. before going to Harvard to earn a master’s in business administration. Then came a job with Maritz, Wolff & Co., a private investment fund in L.A. that owns and develops high-end hotels and other commercial properties.

Fearn founded Integrated Capital in 2004 with Maritz Wolff colleagues Stewart Cushman and Dan Kurz, who are white.

“The idea was to put together a group that could buy hotel assets where we could roll our sleeves up, get our hands dirty and add value,” Fearn says. “That’s what we have been trying to do.”

In addition to renovating the buildings, adding value also involves tackling some intangibles.

“Every once in a while you can walk into a hotel that has no soul, and the question becomes, what do you need to do to give it an identity?” Fearn says. “Success and failure start with the people who work in the hotel because they create the mystique, the image and the culture.”

That requires employee training and retraining, he says, and encouraging employees to bond with the hotel. And if they desired a union, he wouldn’t object.

“We want our employees to feel motivated, respected and rewarded, and if they feel they are only going to feel that way through a union environment then that’s what we’ll have,” Fearn says. So far, none of his hotels have unionized.

He encourages the hiring and promotion of women and minorities. “We would like to see our hotels reflect the community at large,” he says. “We really do work hard at that.”

Marriott International set out in 2003 to double the number of Marriott-brand hotels owned by women and minorities. Fearn helps bring other would-be owners along by participating in a Marriott council whose mission is to promote diversity among owners, and the total of female and minority owners has risen from 250 to more than 400.

“There are two reasons to do this,” says Norman K. Jenkins, a senior vice president at Marriott International Inc. “It’s the right thing to do -- and we are going to make more money. By having a more diverse owner and franchise base we are going to be a smarter company, well ahead of the curve for changing trends and demographics.”

Fearn is a member of Marriott’s policy-setting Owner Advisory Council and serves on the boards of directors of the Los Angeles Area Chamber of Commerce, the Challengers Boys and Girls Club in South Los Angeles and the Andre Agassi Charitable Foundation for at-risk youth in the Las Vegas area.

Looking ahead, he’s uncertain how long the high times in his business will last.

“The hotel industry has another good two or three years,” he says, “but you always have to be prepared for the downtime.”

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Adding value

Kenneth Fearn Jr.

Title: Managing partner, Integrated Capital

Age: 41

Education: UC Berkeley; Harvard MBA

Career highlights: Management consultant, McKinsey & Co.; managing director and chief financial officer, Maritz, Wolff & Co.

Personal: Married, three children. Lives in West Los Angeles. Hobby is golf.