Raising the stakes: Fargo-based hotel company flourishes in big markets

Gary Tharaldson has a new game plan.

The Dazey, N.D., native who made millions building limited-service motels in mid-sized towns today is building bigger hotels in bigger markets.

"As you grow in size, you have to do larger projects to cover your overhead," Tharaldson said on a recent visit to Fargo.

While he maintains a home here, the president and CEO of Fargo-based Tharaldson Cos. for the past several years has made Las Vegas his main home.

Tharaldson has four hotels under construction within walking distance of the gargantuan Mandalay Bay Resort & Convention Center along U.S. Interstate 15 as it winds out of Las Vegas toward Los Angeles.

Tharaldson also has hotels coming soon in Washington, D.C., Philadelphia, Los Angeles, Pasadena and Salinas, Calif.

Tharaldson is building between 12 and 15 properties a year now, all in the $2 million to $3 million range and each with at least 120 rooms. He used to build 30 a year, most in the 50- to 60-room range and mostly in college towns along Interstate highways.

Tharaldson, a Valley City (N.D.) State University graduate, was a teacher and insurance salesman before buying his first motel, a 30-room Super 8 in Valley City, in 1982. He refurbished it and made it profitable.

Figuring he was on to something, he bought several more small motels and did the same. He sold the original Valley City motel and began building new properties. Tharaldson Property Management was formed to oversee operation of a growing number of Tharaldson properties.

The company expanded rapidly in the 1990s, and Tharaldson Development Co. was formed to oversee the construction of several hundred motel properties in 32 states. It became the nation's largest developer of new hotel properties as well as its largest independent property management company.

Today, Tharaldson Property Management oversees 352 properties. And while Tharaldson Development is constructing new properties, the management subsidiary is selling off existing properties in smaller markets.

"Smaller communities are overbuilt with motels. We have to let them catch up with the supply," Tharaldson says.

In 1998, Tharaldson met with representatives of Goldman-Sachs Group, an investment banking company, to explore the possibility of taking his company public.

"I had no interest in not running the company," Tharaldson says. "I don't want to retire when I'm 65. And I didn't need the money. I've never had any problem raising capital."

Instead, Tharaldson in 1999 adopted an Employee Stock Ownership Plan, through which company employees now own 50 percent of the company.

"We'll do $450 million in revenue this year," Tharaldson says. "Our goal is not to grow in numbers, but in revenue."

Tharaldson Communications, a spin-off subsidiary of Tharaldson Cos., provides phone and data service to all Tharaldson properties, plus another 300 or so other motels, nationwide.

Tharaldson's Las Vegas office is in his home. "With e-mail and a fax machine, you can run a business really easily from anywhere. Besides, I like to give people directions, then leave them alone and let them do their jobs," Tharaldson says.

Most businesses, in Tharaldson's view, conduct far too many meetings and are slow to make decisions. "With me, I make the decision and it's final," he says.

Tharaldson is enjoying life in Las Vegas. He plays golf several times a week, pitches for a traveling 55-and-older softball team and plays cards from time to time at the Bellagio.

Tharaldson and wife Connie have a 7-year-old girl, 6-year-old brother and sister twins and a 1-year-old son in private school in Las Vegas.

He has studied the local hotel scene in Vegas, dominated by big glitzy hotels offering all-hours gaming.

Tharaldson locked up land across Interstate 15 from Mandalay Bay, a 1.5-million-square-foot convention center. There, he is building four, four-story hotels: A 160-room Residence Inn, a 146-room Courtyard by Marriott, a 142-room Fairfield Inn Suites and a 139-room Holiday Inn Express.

The properties -- built for a combined cost of $53 million -- offer an alternative to travelers: a hotel you can drive right up to and carry your own bags from your car to your room, just like a Midwestern motel.

"Not everyone wants to stay in a huge casino hotel. A lot of people don't even want to deal with the casinos," Tharaldson says.

He's entering a market that already boasts 128,000 hotel rooms.

Convention hall exhibitors and California motorists are among the target groups Tharaldson's hotels will cater to, Tharaldson says. Room rates can vary depending on demand. A room that might rent for $69 on a slow night might go for $159 when demand is high, Tharaldson says.

Tom Flemmer, Tharaldson's superintendent for construction, is in Las Vegas overseeing construction. "It's been real nice and cool in the morning, then 60 to 70 degrees most of the day. It's been going beautifully," Flemmer says from Las Vegas.

He says the Holiday Inn Express and the Fairfield Inn & Suites should be open by mid-December, while the Courtyard by Marriott and Marriot Residence Inns won't be ready until February.

"It's a perfect site with the Mandalay Bay here," Flemmer says. "I think this will be a little gold mine."

Tharaldson still works with Fargo-Moorhead lenders, including State Bank & Trust, Alerus Financial and Western State Bank, to finance his motel projects.

"The Tharaldson story has been a phenomenal success story," says Dick Solberg, president of State Bank & Trust. "It's been exciting and fun for us to be part of it and watch the company grow."

Kevin Prodoehl, a senior vice president with State Bank, forged a business banking relationship with Tharaldson in 1988, when he was with the former First Interstate Bank. He brought Tharaldson's business to State Bank & Trust when he moved there from Community First Bank (which had acquired First Interstate Bank) in 1993.

"He's always negotiated hard, but he honors his word," Prodoehl says of Tharaldson.

Tharaldson also still does business with area furniture and fixture outlets. "We've always tried to do as much business back home here as possible," Tharaldson says.

Solid Comfort, a Fargo company, has supplied virtually all of the case good and cabinets for Tharaldson properties since the late 1980s. "We're just now starting to change out the product in his original properties," says Jason Larkin, president of Solid Comfort. "It's been a very good relationship. We've grown as a result of Tharaldson's success, and it's helped us land some large contracts with franchise companies."

Tharaldson Cos. remains the nation's largest independent hotel development and management concern, with motel properties under at least 12 chain names.

Nationally, Tharaldson properties employ 7,000 people on a full-time basis and another 5,000 part-time. On a corporate level, Tharaldson companies employ about 150 people in Fargo. At one time, the company employed more than 200. Some jobs that used to be done in house, such as drafting and planning of new properties, has been outsourced to other companies.

And with the shift in strategy, to larger properties, there are fewer managers to train in Fargo.

"I just took a hard-working bunch of employees and they believed in my concepts," Tharaldson says. "We've already created the miracle. Now, our job is to manage the miracle we built."

Readers can reach Forum reporter Gerry Gilmour at (701) 241-5560