• Third parties to merge

Aimbridge Hospitality and Interstate Hotels & Resorts are to merge, creating a group managing more than 1,400 branded hotels across 20 countries.

The deal came as third-party management companies continued to grow in popularity in Europe.

The terms of the agreement were not revealed, with rumours over the summer suggesting a figure around USD1bn. Private equity group Advent International acquired a majority ownership stake in Aimbridge earlier this year and will assume majority ownership of the combined entity.

“Through this merger and under Advent’s ownership, Aimbridge and Interstate can build a platform that differentiates the combined company through optimising owner value, top-notch talent and global expansion,” said Glenn Murphy, chairman, Aimbridge.

Interstate has been owned by investor Kohlberg & Company since 2016, when it bought the group from Thayer Lodging and Jin Jiang. It had been rumoured to be looking to sell this July in an article in Bloomberg that put the valuation on the business at USD1bn having bought Interstate for USD600m.

Dave Johnson, co-founder & CEO of Aimbridge, will become CEO of the combined business. Michael Deitemeyer, president & CEO of Interstate, will become global president, overseeing operations globally and corporate disciplines.

Interstate has been moving deeper into Europe and last year opened an office in Amsterdam, describing itself as “moving full steam ahead in Europe, solidifying its position as the only dedicated hotel management services company with global scale and a comprehensive pan-European operating platform”.

“Interstate’s energy in Europe is indicative of the momentum coursing through the company,” said  Deitemeyer. “Aggressive efforts to expand our reach with important European hotels demonstrate our commitment to providing the best hospitality services in the world.”

The announcement followed an agreement with Dutch investor Borealis Hotel Group which added 12 new hotels to Interstate’s international portfolio, including the company’s first hotel in France.

Interstate will manage the hotels under long-term agreements for owner, development and lease partner Borealis Hotel Group. The pair were considering further growth in the Netherlands, Belgium, Germany, France and additional Western European countries. In addition, Interstate told us that it would continue to pursue the UK and Russia.

Bart van de Kamp, CEO, Borealis Hotel Group, said: “We voluntarily selected Interstate to manage our hotels because we look for strong partners that bring key core competencies and thus optimise the overall strength of the business. Importantly, Interstate has proven to be competent, owner-centric managers who think of the hotels as their own.”

Interstate and Borealis have been affiliated since 2011, when Interstate began managing hotels in The Netherlands for The Vincent Hotel Group, a Borealis subsidiary. In the subsequent four years, TVHG and Interstate opened and managed 10 hotels under Holiday Inn, Holiday Inn Express and Hampton by Hilton brands, leading to a sale of the company in late 2015 to Westmont Hospitality for an undisclosed fee.

Interstate’s EVP, acquisitions & development, EMEA, Aaron Greenman, told Hotel Analyst: “As we all know, the European hotel sector has been performing strongly over the past several years, with certain metropolitan markets, such as Dublin and Amsterdam leading the way. While the end of the economic cycle will eventually lead to slower revpar growth, due to a number of factors we anticipate Amsterdam and most of the other markets Borealis and Interstate are actively involved to continue their recent trend of robust performance.”

Earlier this year Interstate appointed Robert Dodwell as its new regional VP operations, who has held regional and senior operational roles with a number of international brands including Hilton and Intercontinental Hotel Group, working in both the UK and Europe.

Nicholas Northam, EVP international, Interstate Hotels & Resorts, said: “As our UK portfolio continues to expand rapidly, we’re thrilled to welcome Robert to Interstate. Robert’s impressive CV means he’s a valuable addition to our team and will play a key role in the business as we continue to strengthen our presence both here in the UK and across Europe.”

The group has 70 hotels throughout the UK and the Republic of Ireland, including The Marker in Dublin, The AC Hotel in Belfast and the recently opened Holiday Inn and Staybridge Suites at Heathrow Airport. There are 10 more in the pipeline including a Moxy in Dublin.

 

HA Perspective [by Katherine Doggrell]:

This merger – OK not this one, but a merger – of third-party managers was floated at Hotel Analyst’s Hotel Operations Conference earlier this year, as their growth and what many see as a realignment of power away from the brands has continued.

With the third parties now looking to extend their tentacles into luxury and, in the case of Michels & Taylor, participating more closely in transactions, consolidation was much expected. For owners, larger groups means that those nimble parties able to challenge the globe-spanning monoliths of the brands risk being less nimble as they grow.

But a maturing of the sector and, as we have seen elsewhere this week, one where institutional investors have pulled it closer to the mainstream. With such interest will come added demand for rigour and attention to detail – mere revpar alone may not be enough – detail which the third parties can help to deliver.

 

Additional comment [by Andrew Sangster]: Scale has been the missing ingredient for third-party managers to make a real impact on the market. Combining the 80,000 rooms at Interstate with the 100,000 of Aimbridge makes a company that breaks into the top 20 of hotel companies by room numbers globally. The combined group falls just shy of the total number of rooms of Hyatt, a company that sits on the cusp of the global majors grouping.

The bulk of the rooms in the new combination are in the US but Interstate has a long history of working outside the US and this culture looks set to continue.

While third-party operators are still a comparatively new thing in Western Europe, further East and South they are even more novel. Interstate is at the cutting edge of the growth of the concept of management that is independent of brand and ownership, and its new heft can only reinforce its prospects.

 

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