Bob Johnson, America’s First Black Billionaire, Says White Execs ‘Have To Work Harder’ On Diversity
Bob Johnson knows what it takes for people of color to advance to the highest level of the business world.
The founder of Black Entertainment Television, Johnson became the first Black billionaire in American history in terms of personal net worth when he sold the pioneering cable network to Viacom for $3B in 2001.
When he acquired six hotels in 2000 to form what is now a $1.8B REIT, RLJ Lodging Trust, he became America's largest Black hotel owner at the time. And two of the only three Black CEOs of REITs today, RLJ's Leslie Hale and Park Hotels & Resorts' Thomas Baltimore, first reached that level under Johnson's leadership.
In a wide-ranging interview with Bisnow this week, Johnson and Hale discussed why they think progress has been so slow on advancing Black executives to the highest level of the real estate industry, and they shared solutions that they think could help solve the problem.
"These are endemic problems for America’s economic and business community," Johnson said. "So I have no problems telling my CEO friends, Black or white ... that gentlemen, you just have to work harder if you really believe there are talented African Americans out there who can compete just as well or maybe even better than some of the white talent that you instinctively go after."
"Don’t bring me your buddy who plays golf with you every day or the recommendation from your buddy you play golf with," Johnson added. Instead, he said executives and hiring teams must make more of an effort to go outside their typical circles to bring in more diverse employees.
Johnson, who serves as chairman of RLJ Lodging Trust's board and has several business ventures in other industries, said he hasn't seen the diversity pledges that companies made in 2020 after George Floyd's murder lead to meaningful changes. He called for the creation of a committee that would monitor the pledges companies made and force them to be transparent about their progress.
Hale, who became president and CEO of RLJ Lodging in 2018, said over the course of her career in real estate, she has seen some noticeable progress in the overall diversity of the industry when she attends networking events, but not at its highest levels.
"I definitely see more minorities at the more junior level," she said. "But nevertheless, at the levels controlling the investment decisions, that is where there is a lot of work that needs to be done for the minority population."
Johnson and Hale also shared their outlook for the hotel industry and the economy at large. RLJ Lodging Trust, in its fourth-quarter earnings release this week, reported a full-year 2022 profit of $42M after the pandemic caused it to post significant losses in the previous two years.
The executives said they foresee hotels generally continuing the positive trajectory of its recovery this year, but Johnson said he expects the economy to enter a recession. He attributed the economic issues to the federal government's spending in recent years and called for significant budget cuts, including to Social Security and Medicare.
The following interview has been lightly edited for length and clarity.
Bisnow: I was reading an interview you did with REIT Magazine and you mentioned that when you first bought the first six hotels along with Tom Baltimore that launched RLJ Lodging’s portfolio in 2000, you said that acquisition instantly made you the largest Black-owned hotel company in the United States. Why do you think up to that point the hotel industry had been so dominated by white owners?
Johnson: Well I think the obvious answer is lack of access to capital. And with the lack of capital, the opportunity to engage with the hotel sector whether it was brands looking to develop more properties or investors looking to own the hotel real estate, without capital you wouldn’t be in what I call the deal flow. So that’s the primary reason Black companies aren’t prevalent or exist at all in many economic sectors in the country.
Tom and I were fortunate in the sense that I was serving on the board of Hilton hotels and Tom was working there. And when the opportunity arose — and again this is what I call Black business people not being in the deal flow — Hilton purchased a company called Promus, and there were six Homewood Suites in that purchase they didn’t want to keep. They were not core to Hilton’s purchase. Steve Bollenbach, who was CEO of Hilton at the time, came to me as a board member and asked if I would be interested in acquiring those six properties, those Homewood Suites.
At that time, I had never owned a hotel, but I had served on the board for a number of years, so I had a good feel of the hotel business. And I went to Tom Baltimore, who was a senior VP at Hilton at the time, and I asked him if he would come in with me and be the guy who would oversee the assets Hilton would continue to manage. He said he would, and as they say, the rest is history.
Bisnow: Since RLJ was founded in 2000, have you seen much progress in terms of the hotel industry, and the owners of hotels, increasing its representation of people of color? How much progress do you think has been made over the last two decades?
Johnson: I wouldn’t use the word much progress. There has been obviously some progress in that when we bought the six hotels, we were not only the largest, we were pretty much the only one of that size. And there have been other minority businessmen and women who have been able to get into the hotel real estate space because there’s been more of a focus on diversity of capital, equity, inclusion, those factors that are becoming — I wouldn’t call it quite the norm for a number of financial backers — I would say it’s becoming something people are required to look at. One, because most people feel it’s the right thing to do and some because the regulatory bodies and government, both federal and state, are encouraging companies to take the responsibility of increasing economic opportunity.
Has it come to a level I’d be happy with? I’d probably have to say no, not at this time.
The key, I think, is not just starting with capital, but you also have to start with people who have experience and a footprint in the industry. And I think that needs to be worked on as well. What we need to see is the very large hotel companies, the very large brands, bring it on and developing talent, minority talent, men, women, people of all ethnic groups, and once you develop that talent, you have people with the background, training and experience to begin to reach out to [private equity] firms and investors and pursue the opportunity to own real estate properties. That’s something I think we at RLJ are obviously committed to. If you look at the people who have worked with Tom and myself when we had the private equity fund, Leslie, of course, has gone on to be CEO, one of the few African American CEOs on Wall Street, Tom has taken some of the talent he had at RLJ over to Park. So it’s a process that has to start with opening doors, and we are definitely committed to opening doors, not only from the board situation, but also in terms of managerial talent.
Bisnow: You mentioned there are few African American CEOs on Wall Street. And specifically in the publicly traded REIT sector, there are only three Black CEOs, and two of them are Leslie Hale and Tom Baltimore. Did you expect that more REITs would have followed your lead by now? Are you surprised there are still this few Black CEOs?
Johnson: Well I wouldn’t expect them to do it, because I think it takes a growth process for Black talent to rise to the top. And that means somebody has to hand them the opportunity to demonstrate by their training, by their knowledge, by their sophistication as business operator that they are capable of taking on the responsibility of managing publicly traded, multibillion-dollar REITs. And that’s something this country has been working on for a very long time.
When I took BET public back in 1990, BET became the first Black company traded on the New York Stock Exchange after over 170 years of the stock exchange being in existence. None of this is going to happen quickly, but it has to start with leadership. It has to start with the CEOs and the boards and the government and everyone opening up an inclusive opportunity for talented people who all their missing is the opportunity to prove themselves and be in a position to obtain capital, to implement a business opportunity.
Hale: When you think about what it takes for a majority individual to be successful, it’s no different than what we need in order to be successful, people of color, and that’s access to opportunity. And the hospitality industry is in a position to provide more opportunity because if you think about most real estate industries are vertically integrated and the owners of the assets operate the assets. But in the hospitality industry, you have brand partners, you have operators and you have the owners. So because of that, you now have three CEO opportunities, three CFO opportunities, three COO opportunities. So it’s an industry that has a greater opportunity set to be able to provide opportunities for women and minorities. And I think it’s done a better job than most real estate industries, but it still has a lot of room to go in terms of providing the access to opportunities that we need in order to see a greater number of minorities in leadership positions.
Bisnow: Leslie, I’m curious if you’ve seen in recent years as you go to conferences and places the whole industry gathers, have you seen those rooms becoming more diverse, or do you still feel like as a Black woman executive, a Black woman CEO, that you’re somewhat of an outlier in those industry groups?
Hale: First of all, there’s still a ton of work to be done. Having said that, the rooms are more diverse. I definitely see more women, and I definitely see more minorities at the more junior level. But nevertheless, at the levels controlling the investment decisions, that is where there is a lot of work that needs to be done for the minority population.
Bisnow: To your point about controlling investment decisions, we did a special report in November where we looked into the diversity at the C-suite level of commercial real estate. We found that most women and people of color were in more administrative, support-type positions like legal, human resources, accounting, rather than the ones who are in charge of the investment decisions. Does that say to you that the industry’s recent diversity initiatives have kind of missed the mark if they’re not getting more diverse people in those investment positions?
Johnson: Well I don’t want to just pick on the hotel real estate business or the commercial real estate business in general. That’s a problem facing every sector in the U.S economy. There is not enough focus on getting minority talent in what you might call profit center positions or on a path that leads to profit center positions and ultimately to CEO or CFO.
The path for most CEOs is through either the CFO position, in some cases the [general counsel] position, and the other is probably a marketing position. And there is a lack of minority talent in what I call those gateway positions. And that’s something companies have to seriously consider focusing on. If you can’t get people on a bench ready to move up to the top job, it’s going to take you years to get a minority person prepared to break that so-called glass ceiling of the CEO position.
Talented people, whether Black or white, if they like their job and they’re doing a great job, they’re likely to stay on and continue to operate those businesses. So turnover is not something that happens every year in this business or any business. So that’s a problem. But it’s compounded when there is turnover and you start the cycle again of longevity of somebody in those positions you continue to move back the likelihood that a minority individual will ever climb to the top.
We’ve heard so many people at the top, in HR positions or CEO positions, say ‘Bob, I can’t find good minorities to take a job here for this position.’ Well my answer is I’ve been pretty darn successful in solving that problem. And that means they’ve got to really commit to trying, and they’ve got to commit to reaching out to people like myself, people like Leslie and people like Tom and other people to say, 'How can you help us?' And also implementing a required best practice of before you hire a position for that job, you better interview at least one or two minorities or we’re not going to improve that hiring decision, and it may impact your compensation if that’s part of the company’s commitment.
Hale: You have to be deliberate and thoughtful. It is important for us to acknowledge that every role in an organization is important, and every role within an organization contributes to the success of a business, whether HR or legal, but not every role leads to the C-suite. And you have to be deliberate. In terms of looking outside of the normal channels you’ve looked that have historically not led to finding diverse talent, you have to be deliberate about doing that as well.
Bob is very deliberate about having a diverse team, and they looked outside the hospitality industry to find that talent, even though they were in the capital of hospitality. I did not have a hospitality background, I had a real estate background, I had tangential and relevant experience, but I didn’t have hospitality experience. But because they were deliberate about it, they were able to look at my talent more broadly. That needs to happen more frequently in order to grow talent in some of these businesses.
Bisnow: One of the things I’ve heard from people who focus on diversity in commercial real estate is many companies haven’t focused enough on supporting the diverse employees that they hire after they start and helping them advance. How have you at RLJ focused on supporting people of color within your organization and helping them advance to these higher roles?
Hale: Yeah the first thing is to debunk the theory that what it takes to grow, maintain diverse talent is different than what it takes to grow and develop majority talent. There isn’t a single CEO of any company that didn’t have mentorship, sponsorship, support along the way. Not a single one. So in addition to giving people access, they need the mentorship, sponsorship along the way after they get the opportunity. There’s not a special formula for having people of color be successful. It’s the same exact formula. You just have to be deliberate.
Bisnow: I also wanted to touch on the board of directors. We looked at the boards of many publicly traded REITs and RLJ is one of the most diverse that we’ve seen, I think at least half of your board are people of color. Bob, how have you been able to build out that board that is more diverse than your peers?
Johnson: Well I think to focus on this, you’ve got to focus on what came before this, i.e me. Because I was a minority, I tended to say can I find people who look like me and think like me, and who have skill, to work with me. That’s a natural behavior. People like to be friends with who they know. You can give me credit for doing it. But I think the credit is due to the fact I happen to be in a position to build a publicly traded company. But I think the answer to the question you’re looking for is majority owners need to do double duty compared to what I had to do. Because I had the instinct built in me. I had the desire built in me. And I wanted to bring that talent along with me to prove, in some ways, if given an opportunity, a Black-owned real estate fund or a Black-owned publicly traded REIT could be successful. That was part of who I am.
The other side of that is we also made it clear that we wanted talent, irrelevant to Black or white. So we brought along a gentleman named Bob McCarthy, and Robert LeForges, both white board members. And we have a white female board member. Because we wanted to prove that you don’t just have to have just your friends and buddies on the board. You can have people you know who may not be the same ethnic background, they are people who hear your values, hear your vision and are willing to work with you to achieve your objectives whether for private opportunity or public opportunity.
I go back to, nobody I don’t think will be upset when I say this: white America, in order to create more opportunity for Black America, has to work harder. They have to work harder to do it because we as a people, I don’t want to go back to slavery and Jim Crow and all that, but Black Americans simply have not been afforded access to opportunity. I call it being in the deal flow. Being noted and being respected for their capabilities. Those are issues and problems that happened long before we got into the hotel business sector or these became issues in the hotel sector. These are endemic problems for America’s economic and business community. So I have no problems telling my CEO friends, Black or white, those I meet serving on the business council or other opportunities I engage with, that gentlemen you just have to work harder if you really believe there are talented African Americans out there who can compete just as well or maybe even better than some of the white talent that you instinctively go after.
If you are told that before you hire somebody, you must interview a Black talent, that will become part of your managerial behavior, and that’s what we need, the broader community, needs to to instinctively say, 'Don’t bring me your best friend. Don’t bring me your buddy who plays golf with you every day or the recommendation from your buddy you play golf with. Find somebody you don’t play golf with and ask that person, Bob, Leslie, Tom, do you know who we might hire for this open position?’ The bottom line is we need to have an instinctive behavioral change in the way African American talent, minority talent, women, are brought into the economic managerial system of companies in this country.
Bisnow: These issues became a much larger part of the national conversation in 2020 after the murder of George Floyd and the Black Lives Matter protests across the country. Many CRE companies made promises to do better and improve their track record on diversity. Bob, I heard you on David Rubenstein’s podcast recently. You said you don’t think that the business world has done this as much as they promised, you said it’s 'a real sad story because it’s not happening.' Do you think that’s the case for commercial real estate? Do you think this industry has failed to live up to some of its commitments from 2020?
Johnson: I don’t know specifically about the real estate industry in terms of pledges that companies made. But I do know overall that the companies in the U.S. who made pledges to do whatever to better the opportunities for Black Americans, most of those pledges in my opinion have not shown up in terms of actual impact.
I read that there were some $50B in pledges made during that era, and of that number, less than 5% can be tracked and reported on. I went on CNBC and urged those companies that made pledges, and I’d say if the real estate industry made pledges, I urge them to do the same, and that was to create a committee of respected individuals — don’t all have to be in the industry, they could be outside — whose responsibility would be to monitor the pledges and the performance. And then, like we do as a public company, you give a quarterly report to your shareholders and board. They should go ahead and give a quarterly report on how these pledges are performing.
There was no government mandate to make these pledges. These pledges were made voluntarily. And so that they don’t seem to be simple lip service to an intense era with the George Floyd murder and the Black Lives movement, that they’re just not people trying to show they’re doing something just to be perceived as being committed to solve problems, rather than actually performing and solving problems. I don’t know why they would be shy about creating an outside committee made up of talented individuals in the industry or not that would be able to say we missed our mark on our pledges and here’s what our recommendations are to solve the problem.
We’re used to doing it. Leslie knows, she’ll go before the shareholders every quarter and say, 'We said we’re going to do this, either we did it or didn’t do it, and if we didn’t do it here’s what we’re going to do to make sure we do it.’ That’s what these companies, not just in the real estate industry but every company that made a pledge, should be willing to have their pledge verified by an independent committee. Not for the purpose to shame them but to help them do what they said they want to do, which is to make progress closing the wealth gap, economic opportunity, access to capital, and so forth.
Bisnow: Leslie, looking back on the pandemic, RLJ and all hotel owners had a tough time during the shutdowns and the worst part of the pandemic in 2020 but it has since bounced back, and I saw the company just reported a profit for the full year of 2022. How were you able to weather the storm of the pandemic and right that ship?
Hale: Well first of all we entered the pandemic with a very strong balance sheet, which has always been a core tenet for us. And additionally, we had a very talented team. We’ve got to take all of our resources and reset our mindset. We’re used to opening and operating hotels, and we’ve got to figure out how to shut hotels and have an operating model to survive and get to the point we could recover.
It’s a combination of having a strong balance sheet in addition to being creative and thoughtful, and we had a great board that helped us navigate it as well. During the pandemic a couple times a week we discussed what was going on and navigating and strategizing and we were pivoting as we got more information and as the situation unfolded. No one thought it would take as long as we did but we all navigated it the last couple years. It was a function of starting with a strong balance sheet and a great team and being creative.
Bisnow: Were you surprised by how quickly the market recovered last year, especially in urban markets that had seen weaker activity in 2020 and 2021?
Hale: I wouldn’t say surprised, I would say pleased. We felt that urban markets would turn to strong demand patterns, we saw it across the segments both from a leisure perspective which continued to be strong, group really ramped up and continues to press forward. The only thing is that we thought that we’d kind of be the last to recover, that was in our original expectations. But overall, we knew we’d get back to 2019 levels of demand. Just knew that how we got there would be different. We’re very pleased with the trajectory of the industry and the portfolio, and expect like in other cycles that the overall market will surpass the last cycle like we have in every cycle throughout history, we’d expect this next cycle to surpass the last one as well.
Bisnow: As you look ahead, there have been a lot of prognostications about the economy going into a recession. And historically the hotel industry has been one of the first to feel that given the short-term nature of its demand. Are you foreseeing a downturn at all this year or a softening of demand in the hotel industry?
Hale: We’re very sober to the economic backdrop, and the overhang of the concern of a recession, Fed actions, geopolitical issues, the labor market. We’re sober about that, but we’re not seeing it in the fundamentals today. We continue to see things grind forward, and we expect positive year-over-year trajectory. Having said that, the industry as a whole just came through an environment where we went to zero revenue, so I’m very comfortable that we're smarter today in terms of how to operate our businesses, develop skills and efficiencies within the industry to be able to navigate any type of recession.
Bisnow: Bob, can you share your thoughts on the economy and where it stands today? Do you see any sort of a recession on the horizon?
Johnson: Well I’d pretty much echo what Leslie was saying about the hotel industry. In terms of the overall economy, from what I hear, attending business council meetings and going to conferences where a lot of very intelligent people are speaking who know far more about the economic situation than I do, the feeling is that the overall economy is still facing a high level of consumption spending, and that demand is driving prices, and unless you can cool the demand, you’re going to see an increase in prices. And the Fed and its approach is trying to drive unemployment, trying to reduce employment, to a level that will cool consumer spending. So by raising interest rates, they think what will happen is businesses will spend less, businesses will hire less, and unemployment will go up. So I’m kind of on the side that we probably will see a light recession. As the government keeps spending, you’ve got fiscal spending and you’ve got consumer spending, it’s going to be tough to drive down inflation, and unless you can do that you’re going to get into a point where you have this recessionary behavior in the economy caused by huge spending and higher prices.
Bisnow: What would you like to see the Biden administration or Congress do to soften the blow of a potential recession?
Johnson: I would like to see Congress dramatically cut discretionary spending, and if that means doing something on Social Security, doing something on Medicare spending, if you think about U.S. spending, you’ve got defense and you’ve got health spending. That is a big chunk of government elective spending, and therefore they’re a big chunk of the deficit. And unless you can begin to reduce that discretionary, elective spending in these budgets that are coming up when they approve the budget that allows the government to meet its obligation, we likely will face a recession. That’s my feeling.
Bisnow: Last question. Bob, you were the first Black owner of an NBA franchise when you founded the Charlotte Bobcats and today, there are two professional sports franchises up for sale in the Washington area, the Commanders and the Nationals, and both of those leagues — the NFL and MLB — haven’t had a Black majority owner. Do you have any interest in acquiring one of those teams? Or do you think another Black entrepreneur might have interest?
Johnson: Well I’m sure people have interest. For me, I’ve been there, done that. I don’t think I’m looking to call all of my rich friends and say let’s put together a pool of money and go buy this team. I just think it’s not something that I’m interested in doing. Furthermore, it is extremely, extremely expensive to buy a sports team. So those factors are weighing on my decision. One, I’ve done it, I’ve had a sports team before. And the second is to put together the capital, to raise the money to do it, I’d have to call in a lot of chips on some very rich friends who would want to be a part of it.
