NEW YORK — As the traditional route of picking up management contracts through hotel transactions has slowed, Crestline Hotels & Resorts is growing through other means.
The new growth opportunity has come through owners consolidating their portfolios under fewer operators and switching up their asset management, said Ed Hoganson, executive vice president, chief financial officer and chief investment officer at Crestline.
“We’ve been the beneficiary, so compared to last year, we’ve picked up now close to eight more hotels,” he said, citing the Delphi in downtown Los Angeles and the Waldorf Towers in South Beach, Miami, both of which closed during the pandemic and reopened under Crestline in May.
Crestline has a portfolio of about 130 managed hotels across the U.S., most of which operate under Marriott International, Hilton and Hyatt Hotels Corp. brands, though there are some independents as well, Hoganson said. It has a mix of full-service and select-service brands.
“We think it’s important to have that combination,” he said. “We think having a select-service mentality can help us manage costs. Having the full-service expertise helps us understand revenue opportunities and helps our team members grow.”
The same is true of Crestline's mix of branded and independent properties, Hoganson said. The company takes lessons from the brands’ best practices for revenue management and applies them to the indie hotels.
Crestline is focusing more on independent hotels with a boutique feel and higher-end food-and-beverage components, he said. The company is working on reopening hotel restaurants and reimagining hotels with rooftop bars and restaurants.
Hotels to be added to Crestline's management portfolio include two in Colorado — one a branded hotel and the other independent.
“It’s an indication for us that we’re seeing growth particularly in the independent upscale hotels,” he said. They’ve got some sexy [food-and-beverage] offerings and are a little bit more creative, but it’s a neat way to add value and drive revenue.”
The company has been fortunate to work with owners who understand the value that Crestline brings for revenue management, e-commerce, sales and marketing and other efforts that drive revenue, Hoganson said. It’s easier to benchmark cost per occupied room than revenue premiums, an area the company focuses on given how much it can drive value.
“There's only so much cost that you can cut, whereas there's a lot more opportunity, particularly in this market, to continue to drive revenues,” he said, pointing to both revenue per available room and ancillary revenue streams, such as parking or upselling rooms.
Conversion Opportunities
As new development has slowed, hotel conversions have opened up new avenues to growing the portfolio, Hoganson said. One approach that has increased in practices is the conversion of other types of real estate, particularly office buildings, to hotels.
“We’re spending a lot more time on some of those projects,” he said.
These types of conversion projects can result in different room layouts and high ceilings because of how the office buildings were designed, he said. They also open up new locations in downtown markets that otherwise have high barriers to entry.
Crestline hasn’t been part of moving independent properties over to soft-brand collections, Hoganson said. It has a number of strong independent hotels, and it tries to balance the benefits of a strong brand reservation system against the cost.
“We could have done branded, and we think in those locations and those kinds of specific products make more sense to keep them as an independent,” he said.
Improving Profitability
The company’s operating metrics are positive, Hoganson said. Revenue per available room is growing faster than its cost of labor, so profit margins are improving.
“We are very bullish,” he said. “The industry fundamentals are strong. We’re continuing to be able to charge higher, stronger rates.”
The pace of demand is strong, even in hotel markets that hit records last year, he said. The company is on track to have another record year.
“The downtown locations that have come back, we still there that they have got a lot more growth opportunities as international travelers come back, more groups come back,” he said.