Nylo Hotels, the lifestyle brand whose ambitious growth plans were thwarted by the collapse of Lehman Brothers and the economic meltdown that followed, is not giving up.

The company, whose biggest investor was Lehman, said it has restructured its debt and its management team and has made two key shifts in strategy: It is now focusing on gateway cities instead of just secondary and suburban markets and it is looking to grow through conversions rather than newbuilds.

The company also said it is in the process of moving its headquarters from Atlanta to the Dallas area, where two of its three hotels are located.

As part of the restructuring, Michael Mueller, a 20-year veteran of the hospitality industry and the founder and visionary for the brand, became CEO. John Russell, former CEO, remains an investor but left last year to start a new global hotel company, Advaya Hospitality, in partnership with Auromatrix Group, an Indian hotel management and consulting group.

Patrick O'Neil, one of Mueller's early partners in Nylo who has been responsible for operations since the first hotel opened, will continue in that role as executive vice president of operations.

Mueller said the creditors who now run Lehman Brothers Holdings Inc. recently upped their investment in Nylo, which enabled the company to refinance its debt.

"We are now financially strong and able to weather this financial storm," he said.

Still, Mueller said, it remains virtually impossible to get financing to build new hotels, so the company has shifted its strategy to conversions.

"There are a lot of existing assets out there whose highest and best use is a boutique hotel," he said, noting that the list includes existing boutique hotels, failed condo projects and vacant warehouses.

The Nylo brand was created to be an affordable option to the trendy W and Monaco brands. It is designed with an urban loft feel, with features such as brick interior walls and high ceilings. Its first three hotels followed the same prototype. As the company turns to conversion, Mueller said, there will obviously be more flexibility in design.

Another big shift, he said, will be in targeting major cities rather than just suburban and secondary markets. Currently, its two Texas hotels are in the Dallas suburbs of Plano and Irving. Its third hotel, which was closed by flooding but is about to reopen, is in Warwick, R.I., near Providence.

"We are really focusing right now on international gateway cities: New York, Miami, San Francisco, Chicago, L.A.," he said.

Although Nylo after its launch in 2008 had some 50 to 60 hotels in the pipeline, the company currently has just two under development: a warehouse conversion in South Dallas and a newbuild in Overland Park, Kan. Mueller said he expects about 10 of those original projects will resurface when the capital markets recover.

Of its current properties, Nylo owns all but the South Dallas hotel, Mueller said. But the company is looking to grow through a mix of owned, franchised and managed hotels.


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