Latest / Family Business Stories with Fexingo: Succession, Legacy, and Multi-Generational Companies / How the Pew Family Built La Quinta Motor Inns on Consistency
Transcript
- Lucas: If you've ever driven through the American Sun Belt and pulled into a La Quinta, you probably remember the logo — a stylized Q against a sunset. But you probably don't know the family behind it, and that's kind of the point. Luna: La Quinta means 'the country house' in Spanish, right? So it's a chain that's built on being the predictable, solid option along the highway. Lucas: Exactly. Today we're talking about the Barshop family and their quiet partners, the Pew family, who turned one motel in San Antonio into a publicly traded chain with over 200 properties by the mid-1980s. The angle here is less about the brand itself than the financial architecture that let it grow without the flash of a Hilton or a Marriott. Luna: Okay, so this is a story about disciplined capital, not about a celebrity founder? Lucas: Right. Sam Barshop founded the company in 1968. He was a University of Texas grad who'd worked in his family's real estate business. But the critical capital came from the Pew family — heirs to the Sun Oil fortune. They were looking for a vehicle to park family office money in something that generated steady cash flow, not just oil royalties. Luna: And they picked a motel chain. That seems like a bet on a very specific slice of the American economy. Lucas: It was. Barshop's insight was that the mid-tier lodging market was underserved. You had the luxury hotels downtown, the roadside motels on the outskirts, but nothing for the business traveler who needed a clean room near an office park. La Quinta's innovation was location — they built next to the highest-traffic commercial arteries in growing cities. But here's the financial kicker: they designed the whole business model around a breakeven occupancy of 65 percent. Luna: Versus what the industry was running at the time? Lucas: Industry average was around 75 percent. So La Quinta could afford to be half-empty and still turn a profit. That gave them pricing flexibility — they could undercut competitors on room rates and still make money, which drove up occupancy quickly. By the early 1970s, they were running at 80 percent or higher. Luna: So they built a moat by being leaner, not fancier. That's a classic strategy, but it's hard to execute without the capital to build properties in the right spots. Lucas: And that's where the Pews came in. J. Howard Pew and his siblings controlled Sun Oil, and they'd set up the Pew Memorial Trust and other foundations. But the family also had a direct investment arm — they put roughly $5 million in seed capital into La Quinta in the early years. For a motel chain in 1970, that was a lot of money. Luna: Did the Pews get involved in operations? Lucas: Almost not at all. Sam Barshop ran the company day to day. One of the Pew family members sat on the board, but they were famously hands-off. This was a classic family office play — they backed a proven operator in a growing sector and let him execute. The big test came in 1987. Luna: That was the year of the leveraged buyout, right? I remember reading that La Quinta went private. Lucas: Yes. A group led by Barshop and backed by the Pews took the company private in a $217 million leveraged buyout. At the time, La Quinta had 207 properties. The LBO was structured so that Barshop retained operating control, and the Pews provided a large chunk of the equity. They had to borrow heavily, but the cash flow from the motels covered the debt service. Luna: And this was after a hostile shareholder situation. I think a guy named Donald — something — was trying to force a sale. Lucas: Donaldson, Lufkin & Jenrette? No, that's the bank. The activist was actually a New York investor named Richard Rainwater — not the private equity guy, the one who later backed Columbia/HCA. He'd accumulated a stake and was pushing for a breakup or a sale to a bigger chain. Barshop and the Pews resisted, and the LBO was the way to take the company off the public market and fend off the activist. Luna: So the Pews doubled down. They didn't cash out when a hostile investor showed up — they bought more, effectively. Lucas: Exactly. That's the family office advantage. They had long time horizons. They weren't managing for quarterly earnings. The LBO loaded the company with debt, but they believed in the underlying economics. And they were right — by the early 1990s, La Quinta was public again, and the stock had tripled. Luna: I want to circle back to something. You mentioned they built next to high-traffic commercial arteries. But how did they choose specific cities? Was it just a matter of following population growth? Lucas: They had a very specific heuristic. Sam Barshop called it 'tier-one adjacency.' They would locate a motel directly adjacent to a major employment center — an office park, a hospital complex, a university, a military base. Not necessarily downtown. And they would avoid tourist corridors because that business is seasonal. The goal was consistent midweek occupancy from business travelers. Luna: So they were really betting on the growth of the Sun Belt's service economy. Doctors, sales reps, consultants who needed a room near the office park. Lucas: Right. And they didn't spend on advertising. Almost zero marketing budget. The strategy was: put a sign on the highway, and rely on the fact that the motel was in the logical place for someone who had a meeting at 8 a.m. the next day. Word of mouth and repeat business drove occupancy. Luna: That's a very different model from the loyalty programs and billboard wars of the big chains. Lucas: Totally. The Pews understood that. They didn't try to turn La Quinta into a brand with a mascot and a credit card. They just funded the real estate. And that brings us to a broader point about family businesses: sometimes the most successful multi-generational stories are the ones where the family stays in the background. Luna: We talk a lot about founders and heirs on this show — the power struggles, the succession dramas. But the Pews are almost invisible in the La Quinta story. They provided patient capital and then got out of the way. Lucas: It's a quiet kind of success. And honestly, it's why we keep doing episodes like this one. If these conversations have moved your work forward in some small way — maybe you're thinking about capital allocation in your own family or you're building a business with a long time horizon — we want you to know that we deliberately don't run ads on these shows. No sponsorships. No commercials. Luna: Yeah, that's a choice we made from the start. And listener support is what keeps it that way. If you want to support that choice, the link is buy me a coffee dot com slash fexingo. Lucas: We keep it simple. No perks, no rewards — just knowing that you're helping us stay independent. Okay, back to La Quinta. After the LBO, the company went public again in 1990, and the Pews gradually monetized their position over the next decade. They didn't sell all at once. They did it methodically, in blocks, as the stock appreciated. Luna: So what was the final return for the Pew family? Roughly? Lucas: Hard to pin down exactly because the family office was private. But if you look at the trajectory — they put in roughly $5 million in the early 1970s, and by the time La Quinta was sold to the Blackstone Group in 2006 for about $3.4 billion, the Pew entities held something like 8 percent of the company. That stake alone was worth over $270 million. Luna: That's a 50-fold return over 35 years. Not bad for a hands-off investment in a motel chain. Lucas: And it's a testament to something Sam Barshop once said in an interview: 'We didn't try to be the best hotel. We tried to be the most predictable.' That predictability extended to the capital structure, too. The Pews never forced a sale or a merger. They just let the formula run. Luna: There's a lesson there for family offices today. The temptation is to chase the next big thing — tech, crypto, SPACs. But the Pews made their fortune in oil, and then they parked it in motels. It's almost boring. Lucas: Boring can be beautiful. And it's worth noting that the La Quinta story is also a story about regional economic shifts. The chain's growth tracked the rise of the Sun Belt — Texas, Florida, Arizona, California. The Pews were essentially betting on the migration of people and jobs out of the Rust Belt. Luna: And they didn't overcomplicate it. They found a good operator, gave him capital, and let him execute. That's the family business model at its simplest. Lucas: Right. And today, La Quinta is owned by Wyndham after a series of acquisitions. But the brand still exists, and a lot of those original tier-one adjacency locations are still operating. The Barshop family, by the way, also did well — Sam's son, David Barshop, later became CEO. So it was a multi-generational story within the management family too, even if the Pew family stayed in the background. Luna: I think that's a nice note to end on. The Pews provided the capital, the Barshops provided the execution. And together they built something that lasted four decades. Thanks for listening, everyone. Lucas: Yeah, that's it for this episode. Next time, we'll look at a family business that took a very different approach — one where the family insisted on being in the spotlight. See you then.