Jerry Patava is an unusual guy. Unlike many of his counterparts in the finance profession, Patava, the finance chief of Fairmont Hotels and Resorts, did not take the familiar career path from C.P.A. to CFO. After earning an M.B.A. in finance from York University, Patava became a financial analyst at Consumers Gas, then the largest gas distribution utility in Ontario. In the spring of 1980, when Consumers Gas merged with Hiram Walker, a Canadian liquor company, Patava joined the treasury department of the new corporation, which was renamed Hiram Walker Consumers Home Ltd. For the next six years he worked his way up the treasury department to become assistant treasurer in 1986.
When the company was later acquired by Gulf Canada, an oil and gas subsidiary wholly owned by Olympia and York, Patava decided to make the leap to investment banking. He joined RBC Dominion Securities, Canada’s largest investment bank at the time. After four years at RBC, he was ready to go back to where he was most comfortable: the corporate world. Patava signed on as treasurer of Canadian Pacific Ltd., a large holding company with numerous subsidiaries in various sectors including railways, forest products, mining, and hospitality. At Canadian Pacific, he was responsible for the treasury functions at both the holding company as well as a number of its subsidiaries. In January 1998, after the holding company spun off its five subsidiaries, Patava became CFO of the hospitality business Canadian Pacific Hotels. That unit has since been renamed Fairmont Hotels and Resorts. The company’s shares began trading publicly in New York and Toronto in October.
As if being CFO at North America’s largest luxury hotel management company weren’t enough, Patava is also CFO of a number of the company’s subsidiaries, including Legacy Hotels & Real Estate Investment Trust and Delta Hotels. The mother ship, Fairmont Hotels & Resorts, owns and operates 77 luxury and first-class properties in Canada, the U.S., Mexico, Bermuda, and Barbados. The company’s flagship properties are the Fairmont in San Francisco and The Plaza in New York.
Patava recently spoke with CFO.com about his career, the difficulties of working in the travel business at a time when few people are traveling, and the challenges of managing a number of businesses at once.
Unlike many chief financial officers, you opted to come up the ranks through the capital markets and corporate treasury side, rather than the CPA/audit firm route. What led you to make that choice, and what have been some of its benefits?
Indeed, I am not a C.A., which is the Canadian equivalent of a C.P.A. I came up the capital markets/treasury side as opposed to the internal accounting audit side. Working both within a corporation and as an investment dealer has given me a perspective of both sides of the financial markets –the issuer’s perspective and the investment banker’s perspective. As a CFO, more of my time is spent on capital market issues than it is on accounting and control type issues. They are both very important, but with a strong controller, I am able to devote more of my time to financial marker issues.
Why did you decide to switch from the treasury function to investment banking instead of, say, going directly for a CFO position?
CFOs deal with investment bankers fairly frequently, and I wanted to understand how they operated. I wanted to acquire a better appreciation of their business, and to learn how to deal with them more effectively. I was also very interested in how I could use that knowledge to help my business. That experience has been extremely helpful in my role as CFO. Whether it is going through public offerings, managing large complicated financings, understanding how the sellers of those products works–all that is very valuable to me. It really helps me in my negotiations as well. It makes it hard to fool me.
Is there anything in your career that you wish you had done differently?
One thing that I wanted to do that just never panned out was working in the public sector for a couple of years. I have always thought that exposure to the public sector would have been helpful in terms of understanding how it deals with corporations. There are many constituents in our business and one of them is the government. We are part of the tourism commission, for example. Also, on the tax side, our business intersects a lot with the public sector, both provincially and federally. We deal with the government in planning processes and new hotel development, so there is a whole range of intersection with the government. The more you know about your constituents the stronger you can be.
You’ve been with Canadian Pacific for a large part of your career. Do you have any concerns about limiting yourself to one company?
No. Because of the diversity of the group, and because our companies operate in numerous countries and jurisdictions, there are many different areas to get involved in. I actually prefer this situation. Although we are in the hospitality sector, we have many different brands, and are expanding into the spa and golf businesses as well. So there is lots of diversity here, and I am provided with as much job content as I need. A company that is not as diversified, and operates solely in one country just doesn’t interest me all that much.
You are not just CFO of Fairmont Hotels and Resorts, the parent company, but also of many of its subsidiaries. Is it challenging to juggle various businesses simultaneously?
Yes its is. But I did it before when I worked at Canadian Pacific Limited, the holding company. In that job, I also had to coordinate the activities of a number of companies. It can definitely make things much more complicated. I have to wear many hats at once, but that’s also what makes my job so interesting.
Your company, and the hospitality industry in general, are going through some tough times right now. How has that affected you and how are you managing through these difficult times?
We are slightly different than most of our U.S. competitors because about half of our business is Canadian, and the Canadian market has not been as severely affected as others.
But there has been some impact on us. I would say the real effect has been on the cost side. We are now more cost conscious in the way we operate our properties. We have also had to be particularly mindful of the way we utilize the capital we have. Our company is fortunate enough to have a very low level of debt coming into this type of situation, but we still have to make sure that our capital is being effectively deployed into new projects or acquisitions.
A number of finance executives in the U.S. felt that the costs and losses incurred in the wake of the September 11 attacks should be reported as extraordinary items. FASB, however, ruled that they should be classified as part of regular operating activities and included in the P&L. Although much of your business is in Canada, your company is also significantly exposed to the U.S. market. Did that ruling affect your U.S. business, and do you think FASB’s decision was the right one?
We report under Canadian GAAP, but we do adopt–where we can–many American accounting policies to make us more comparable to our U.S. competitors. I am familiar with the discussions you are referring to, but we didn’t believe they would be very fruitful, so we made no attempt to quantify our losses as extraordinary. During the third quarter, which we have already made public, the impact on us was significant. But from September 11 to September 30, which is when you would attempt to make that argument, the impact was not all that significant. I think the rules are pretty clear on what’s extraordinary and what is not, so we made no attempt to classify these items as extraordinary. My feeling was that the argument was not very likely to succeed. But if the rules were to be changed and FASB or the SEC was to come out with a pronouncement, we’d take a look at it.
Are there any special perks to being the CFO at a luxury hotel operator? When people hear what you do for a living, they must figure you spend a lot of time traveling to all these exotic places, playing golf, and things like that.
To be honest, the traveling is interesting, but it’s a large part of my job. So, the fact that I get to go to different hotels may sound great. But believe me, it’s not much fun to be in Barbados in a suit.