When Aimbridge Hospitality and Interstate Hotels & Resorts announced plans to merge last year, executives touted the increased scale and resources the combined company would provide hotel owners. During the pandemic, that’s been put to the test.
The Aimbridge-Interstate deal closed 25 October 2019, and the teams were still getting to know each other during the integration process when the coronavirus pandemic hit in March, said Global President Mike Deitemeyer, who will become president and CEO 1 January 2021. He and current President and CEO Dave Johnson, who will transition to executive chairman, approached Aimbridge’s owner, Advent International, with a strategy to push through the crisis.
The strategy called for investing further in the integration and spending $17 million on technology and a combined platform. The company could have run on disparate systems longer, but Advent’s leadership believed in the eventual rebound of the hotel industry, Deitemeyer said.
“These investments are going to pay a dividend in helping us be that best-in-class operator going forward,” he said.
The company pivoted and invested further in business analytics, appointing leadership in operations and sales business analytics.
Aimbridge laid off and furloughed only a few employees in its corporate offices, ensuring operators were available to help its hotels through the challenges of the pandemic, Deitemeyer said. When it was time to recall staff, Aimbridge added to its treasury team to help hotel owners with cash flow needs.
As additional help, the company also created its government affairs office to help navigate the federal government’s relief programs. For many months, owners’ top concerns were about cash management and needing guidance through the CARES Act’s Paycheck Protection Program, he said.
Eight companies in one
Competitors of Aimbridge have tried to use the company’s size against it, especially since its merger with Interstate, saying it’s too big to provide the personal attention many owners are looking for. Prior to the merger, however, Interstate had been implementing a new structure, separating property types into verticals, such as select service, extended stay and resorts, and that has been formalized during the integration.
The verticals have experts who lead them and are responsible for anything from training to metrics to helping with deployment at the property level, Chief Marketing Officer Andrew Jordan said. This structure allows the company to better understand the guest experience and give more personal attention to its hotels, he said.
“To some degree, the vertical structure shrinks the company,” he said. “Rather than being one company managing 1,500-plus hotels, we’re eight different companies because we really are kind of more focused groups in that regard.”
During the pandemic, the leadership atop each vertical has helped to keep Aimbridge nimble and responsive to owners, he said. As the structure continues to evolve, it also is creating training opportunities for employees.
Working with owners
In response to the pandemic, Aimbridge shifted its focus, adapting operations to help associates and guests, and turning its attention to owners, EVP of Operations Elie Khoury said.
“On the owners’ side, we wanted to start to focus on impact decision-making,” he said.
At the higher level, that included adding the chief government affairs office to work with the American Hotel & Lodging Association to advocate for the industry and owners.
The focus on helping owners also meant speaking with owners directly to determine their needs.
Aimbridge created tools to help advise owners on whether to open or close hotels, Khoury said. A “break-even” analysis considered a property’s expenses, even when closed, to help the hotel GM and owner determine how much revenue was required to stay open.
“We were able to manage the least amount of loss for the company because we were able to work with our owners,” he said. “At the end of the day, if in this market, we can run 8% or 9% occupancy, we can break even, or we can limp along instead of completely shut down and lay off all associates.”
The regional operations leaders have a handful of properties they’re responsible for, sometimes including multiple ownership groups, and were on the phone every day with owners and asset managers to provide updates on revenue and costs, EVP of Operations Ben Perelmuter said. Since the brands had significant reductions in staff, Aimbridge’s operations teams acted as liaisons between owners and brands as well.
“That’s where I spent a lot of my time, really talking to owners, helping them even in areas where it’s not really something that we do on a daily basis in terms of lender assistance and things like that,” he said.
Capturing demand
The select-service vertical includes 651 assets, making up about 42% of Aimbridge’s total managed inventory, Perelmuter said. These properties, under all major brand flags, range from midscale hotels up to upscale and upper-upscale, typically with 90 to 150 guestrooms, and less than 2,000 square feet of meeting room space.
Roughly 80% to 90% of these hotels target business transient demand. As a result, occupancy for hotels in the vertical has decreased significantly compared to 2019, but has stabilized over the last several months.
Aimbridge’s select-service hotels are outperforming in market penetration within their competitive sets, Perelmuter said. Those in the extended-stay segment are reporting higher occupancy due to demand from first responders and medical professionals. However, select-service properties typically serve guests traveling midweek, which has decreased.
People want to travel, but their priority is whether they can protect their family while doing so, said
Arianne Valentino-Welch, VP of resorts sales and marketing, said guests are seeking beach destinations and other properties offering opportunities to be outside, because that’s where they feel safest. Guests have also indicated that travel agents are still important in the luxury market.
“That luxury, high-end traveler is relying on that travel agent to know what’s safe and where they feel comfortable sending them,” she said.
Large groups and associations aren’t traveling, but smaller groups are still a possibility, Welch said. Aimbridge has invested in marketing to meeting planners to emphasize safety, with messaging around social distancing and food service.
Matt Greene, EVP of lifestyle operations at Aimbridge’s lifestyle subsidiary, Evolution Hospitality, said reassuring guests is also a priority. Training, constant communication and cleanliness protocols are helping hotel staff educate guests and make them feel more comfortable about their stay.
“We want to provide a safe and secure and comfortable environment, and we’ve really gotten into this mentality where we’re communicating,” he said.
Still growing
Aimbridge expected record-setting pipeline growth in 2020, and managed to add to that expectation during the pandemic. The company has added about 25 hotels during each of the past three month, Deitemeyer said. At a recent board meeting, executives projected the addition of 104 hotels this year, despite almost no new hotels added March through July.
“We’ve had a tremendous wave of growth and are pretty optimistic, certainly, about what we see going forward,” he said.
Some of these properties are managed by solid operators who simply don’t have the balance sheet to keep paying staff when demand is so low, resulting in stressed performance, Deitemeyer said.
Aimbridge has added three hotels from real estate investment trust DiamondRock Hospitality this year, most recently the Renaissance Charleston Historic District Hotel. Other publicly traded REITs and large private equity investment groups, including one with 31 hotels in the United Kingdom, are also moving hotels over to Aimbridge’s management portfolio.
With each addition, it’s important to consider how the property needs to be supported, and to ensure the necessary resources are deployed, Deitemeyer said. The separate verticals allows the company to pull resources for a property without harming another hotel type.
“It allows Aimbridge to manage products in all the categories with dedicated teams and leadership,” he said. “They understand those categories.”
