Tharaldson built empire from scratch
Gerry Gilmour
The Forum - 11/27/1999
Gary Tharaldson likes to win.

Be it the softball diamond, golf course, stock market or business arena, the 54-year-old Fargo businessman prefers coming out on top.

And most of the time, he does.

"The key thing is that I enjoy the game," Tharaldson says, relaxed and surrounded by softball and golf memorabilia in his office. "You have to be successful at every game."

North Dakota's richest man made a name for himself by being the best in the limited-service motel game.

His Fargo-based company, Tharaldson Enterprises Inc., operates 312 motels nationwide and has another 25 under construction.

Tharaldson Enterprises this year will generate $345 million in revenue and complete $150 million in new construction.

Tharaldson in 1998 made the Forbes list of America's 400 richest people. An estimated $520 million in net worth put him at 385. He was honored this year by Ernst & Young as the Entrepreneur of the Year in real estate for the Midwest.

Thinking big

Tharaldson, the son of a carpenter and one of six children, grew up in Dazey, N.D. As a youth, he said, he always had an interest in business, and dreamed of accomplishing something big.

"I always wanted to do something on a large scale - I just didn't know what the vehicle would be," he says.

After graduating from Valley City (N.D.) State University with degrees in business administration and teaching, he went to work in Leonard, N.D., teaching business and physical education.

At 24 he entered the insurance business and rapidly became a leading general agent for several companies he represented, and within a few years had a sales force of more than 100 agents.

"I was a hard-working salesman," he says. "I would out-work everyone else."

He says he recognized early that hard work alone wouldn't cut it in sales. The key, he says, is identifying and selling to the people who need your product.

Sounds simple enough. Yet Tharaldson says he's seen many in sales spend too much time courting those who don't need their products and services.

"We only try to market to people who use our hotels," Tharaldson says. "Successful companies identify the people who need the product."

Learning on the job

Tharaldson knew little about the motel business in 1982 when he bought and refurbished the Super 8 at Valley City. He resold his first property for a profit and began buying, fixing up and either selling or operating other Midwestern motels.

By 1989, motels were his full-time business pursuit. He would build them and they would come. By 1990 he had a cash flow of $3 million. By 1991 it had jumped to $6 million.

Hotel and Resort Industry magazine in 1992 was calling him "a modern-day entrepreneurial and financial guru for the U.S. motel development and management industry."

Tharaldson's secrets of success? He has none - none in that he'll happily share, with anyone who asks, just how he went about building a motel empire.

He had to learn the business from scratch. If you want to try it, go ahead. Just try keeping up.

Tharaldson's first loans, which he secured from local bankers, were at 14 percent. Not the greatest rate for the bottom line.

"I'm a very calculated risk taker," Tharaldson says. "I have the ability to look at something and see how it can be made to work."

And what worked at 14 percent worked even better as the rates came down.

The place to be

Tharaldson says there are three keys to the motel room business. You can write 'em down: location, management and a great product.

"Combine those three and you can make anything successful," Tharaldson says.

Tharaldson by nature is a hands-off manager. Location is the exception. Others may find the site, but the boss always has the final say.

The company looks primarily at college towns on major interstate highways. Then the focus is narrowed to an area surrounding a regional mall.

"Even in a downturn, we feel we have the best location. Somebody might out-position you near the mall, but at least you know you're still in the right area," Tharaldson says.

With the location selected, the company moves to get a manager in place. Tharaldson says they've come a long ways from the early days of hiring motel managers.

"We used to go by gut feeling. Now we test first - to find the qualities we want in a manager - and our next criteria is experience. The competition is very tough today. You need people who have business thinking."

Once the location is selected and the manager in place, Tharaldson Enterprises' team of architects and engineers and the company's in-house general contracting firm - Tharaldson retains his own to control construction costs - build the motel.

The names to know

Tharaldson owns and operates signature motels in a number of lines. You're probably familiar with the names: Marriott International (Courtyard, Residence Inn, Towne Place Suites, Fairfield Inn and Springhill Suites); Promus (Hampton Inn & Suites, Hampton Inn and Homewood Suites); Carlson Hospitality (Country Inn & Suites); Bass Hotels & Resorts (Holiday Inn Express); Choice (Quality Suites, MainStay Suites, Sleep Inn. Comfort Inn, Comfort Suites and EconoLodge); Cedant (Super 8 and Days Inn); and US Franchise Systems (Hawthorne Suites).

"You want to be with the top companies," Tharaldson says. "Their products are consistent from one to another. People like to know what it's going to be like before they check in, to know that it's going to be a good, quality room."

Tharaldson Enterprises has the most properties (108) in the Fairfield Inn category, followed by Comfort Inns (57) and Hampton Inn (36). Tharaldson today is almost exclusively building motels in the Marriott line.

"We think they are the premier product," Tharaldson says. "We feel they carried the standards that we wanted to live up to."

He has also avoided the temptation to build large, full-service motels.

Do the math

Tharaldson bucked the national trend - and created a new motel model - by financing and building inns with between 56 and 64 rooms.

"That's just a mathematical thing," he says. If you have a 100-unit property, and 50 rooms are filled, that's 50 percent occupancy, or roughly the break-even point in the inn industry.

But if you only have 60 rooms, and 50 are filled, "you're making money," Tharaldson says.

He plans to keep building about 25 properties a year until he reaches his goal of 400 motels.

"I like to take a concept and duplicate it," Tharaldson says. We're no different from a manufacturer. We make a good product and we keep making it. But we also have to be willing to change as you go."

Tharaldson is taking his motel development expertise into a new realm with the development of Lady Wellness. As a partner in the project, he hopes to develop 100 of the women-only health clubs within the next several years.

Despite his success, Tharaldson isn't one for long-hours or micro-management. Just as he walked away from the pitcher's job on his senior softball team several years ago (those line-drives off old pro sluggers were real shin-stingers), he's delegated much of his management duties to key people.

"I'm only the vision behind the program. The work is carried out by my people and their key people," he says. "It takes all kinds to make up a good team. And we've got some great people."

Hire only the best

Tharaldson Enterprises employs 250 people in its Fargo corporate offices. Another 7,000 work full-time at his motel properties.

That's a big part of what keeps him going. "I have an obligation to our employees to make it good for them as long as I can," Tharaldson says.

The father of six children - ages 2 to 30 - from two marriages, he lives in Henderson, Nev., seven months of the year and in his Fargo home the remainder of the year. He travels in his King Air 200, the same one used at times by his softball teams.

"Basically, I answer phone calls," Tharaldson says. "If I can get four good working hours a day, it's more than enough. The problem with going to the office is that you get interrupted, and don't do any work.

"I spend a lot of time doing nothing - golfing, or watching TV or the stock market or whatever. That's time that I spend thinking about how we can do this better."

He also remains active in softball, in recreational and co-ed leagues. He says he has no plans to retire, either from the diamond or the business arena.

"I enjoy the competition of the game," Tharaldson says. "I've always found that I like winning a lot better than I like losing. But I never get too high if I win, and never get too low if I lose."