• Third party management continues consolidation

Interstate Hotels & Resorts has acquired the management agreements of Rim Hospitality for an undisclosed fee.

The deal is the latest in a series for the group, which last year acquired Chardon Hospitality in the UK, as the third-party management sector continues to grow.

The addition of Rim Hospitality will add nearly 70 hotels with more than 10,600 rooms, including hotels under brands for Marriott International, Hilton Worldwide and Starwood Hotels & Resorts.

“Interstate is committed to strengthening our presence on the West Coast, enriching services and focusing on success for our owners and client base in the region,” said Leslie Ng, chief investment officer of Interstate. “Maintaining and enhancing Rim’s leadership teams and executives for continuity and growth is an extremely important objective of Interstate.”

Robert Crook, managing director in the UK, who joined the group with Interstate’s acquisition of Chardon Management in September last year, told Hotel Analyst: “Consolidation is the future – companies like Interstate are very ambitious and keen to grow and the way to do that is either through organic growth or more strategically.”

Interstate’s acquisition of Chardon added 32 hotels to its estate in the UK and Ireland, taking it to a total of 47 hotels. This latest deal with Rim Hospitality added to Interstate’s portfolio of nearly 400 hotels with 71,000 rooms located throughout the U.S. and around the world.

As Interstate was bolstering its standing in its domestic market, so Topland was doing the same in the UK, with a GBP75m deal to acquire four star hotel chain Hallmark. The deal gives Topland eight UK hotels, adding 730 rooms and taking its portfolio to 30 hotels nationwide.

Hallmark was acquired in 2007 by Bridgepoint for GBP55m. Bridgepoint sold the assets to Topland in an off-market transaction, after upgrading several hotels from three stars to four. Topland will combine the Hallmark properties with its Menzies platform, acquired in 2013. The combined group, with more than 3,000 rooms, will be managed by Bespoke.

Topland is preparing itself for a floatation within the year, with the group looking towards a GBP1bn valuation. Its current value is estimated at around GBP500m. Lionel Benjamin, Topland’s director of hotels, told the Financial Times that the deal reflected Britain’s economic recovery, which has begun to ripple out from London into the regions over the past year, adding:  “The hotel sector is particularly attractive to our group because we believe we can drive income streams which traditionally have lagged behind other commercial property assets.”

The acceleration of Topland’s growth has been marked by scooping up properties in the under-pressure regional UK markets. As previously reported in Hotel Analyst, Topland’s first major step into the hotel sector was in 2005, when it acquired a portfolio of Thistle hotels purchased in a sale and leaseback deal. The GBP185m transaction was backed by Thistle signing 30 year leases on the properties, with fixed increases for the first half of the agreements.

In 2011, the company added to its portfolio of owned hotels, buying two Hiltons from the Royal Bank of Scotland. It paid GBP39.25m for the Hilton Brighton Metropole, a 340 room seafront hotel; and GBP35.7m for the 319 room Glasgow Hilton. Both are let to Hilton on 30 year leases from 2001, with a turnover element to the rental paid.

In 2012, Topland took its first more direct operational interest, buying the Royal Crescent hotel in Bath from the administrators to the Von Essen hotel group. Vision Asset Management was installed to run the hotel.

Topland is looking to further expand its hotel portfolio and said that it would consider individual acquisitions and portfolios or corporate acquisitions across the UK and Europe and is thought to be looking at one or two specific deals.

Also in the UK, fellow management company Kew Green has secured seven new contracts during the second quarter of 2014. Four Ramada Encores, two Holiday Inns and the Grand Hotel in Brighton have been added to its portfolio, which now numbers 37 hotels.

The Ramada properties are in Barnsley, Crewe, Haydock and at Birmingham’s NEC. Paul Johnson, CEO, said: “We are delighted to have added these hotels to our portfolio and look forward to seeing them continue to develop under our management. These additions are part of our continued strategy to grow our managed division, alongside our owned estate, with a target to reach a portfolio of in excess of 60 hotels.”


HA Perspective [by Chris Bown]: While there are plenty of ways to structure a hotel business, the move to asset-light has helped deliver the growth of the focused third party manager, interspersing brawn between the bricks of real estate ownership and the brains of brand marketing.

And in the global business of hospitality, Interstate has demonstrated how it believes it can effectively deliver a hotel management business across borders, albeit by acquiring local expertise to drive its growth. It is not all one-way traffic, either. UK management company Bespoke, which is growing its business with the help of landlord partners such as Topland in the UK, recently opened a US office and believes it has a service of value to offer to US owners of boutique hotels. Stretching further afield, Redefine from South Africa linked up with UK management company BDL.

For a larger management company, there will be efficiencies of scale. But there are also opportunities to nurture and grow staff – an area where new rulebooks may need to be written.

Industry newcomer Mike DeNoma at GLH says he was stunned by the waste of human capital he discovered in the sector, as staff work to rules that give them little discretion; and at GLH he is seeing great results from empowering staff. Such initiatives are essential, if the more demanding millennial hotel customer is to experience a great stay, whether the hotel is budget, boutique or luxury. And hotel management companies with an international business also have the potential to support brand partners expand in parts of the world where skills shortages are proving a drag on expansion. Never mind the increasingly sophisticated management software, guests meet staff – and that’s where loyalty can really be won or lost.

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