Aimbridge Hospitality and Interstate Hotels & Resorts have entered into a definitive agreement to merge, creating what will be by far the largest third-party hotel management company in the world.

The two companies publicly announced the merger today. A merged Aimbridge and Interstate will create a company with 1,400 branded and independent properties in 49 states and 20 countries.

The two companies each see their first priority as delivering better value for their hotel owners, Aimbridge founder and CEO Dave Johnson said in an interview. With Aimbridge being No. 1 in the space and Interstate as No. 2, a merged company would have their combined resources, creating more value and separating them even further from the pack, he said.

“We just felt like we could be better partners and operating partners for all our owners across the gamut,” he said.

Interstate President and CEO Mike Deitemeyer said he’s excited about this opportunity to do something that’s not been done in this space before. Upon closing the deal, he and Johnson will lead a company of more than 60,000 employees, he said.

“I think Dave and I can bring a level of excitement to the company to help propel it forward and help our teams achieve their personal goals,” he said. “I’m very excited about it. I certainly think it will be a game-changer in this space.”

Private equity investor Advent International acquired a majority ownership stake in Aimbridge in January 2019 and will assume majority ownership of the combined companies. The company publicly announced the details of the merger today but did not disclose the terms of the transaction. Pending regulatory approval, the deal is expected to close by the end of the year.

When the two companies merge, Johnson will serve as CEO of the combined companies. Deitemeyer will become global president and oversee global operations and corporate disciplines.

The company will be headquartered in Plano, Texas, Aimbridge’s current home, and will maintain domestic corporate offices in Virginia, Atlanta, California, Chicago and Puerto Rico, as well as international offices in Birmingham, Glasgow, Amsterdam and Moscow.

Johnson said he and Deitemeyer have known each other and been friends—and friendly competitors—for 20 years. While they had talked in years past about joining together, Johnson said it wasn’t until the last three to six months that they started having serious dialogue. It’s a strategic decision for both companies, he said.

Aimbridge has acquired smaller management companies over the past few years, and the deal with Interstate is a merger as compared to the straight acquisitions of the other companies. Though he said it’s an overused expression, he believes this is a situation in which “one and one make three.”

While the two companies have a number of complementary assets in the U.S., Interstate has more brand equity internationally as a bigger footprint outside of North America, Johnson said. Aimbridge has a larger presence in the resort space in South Florida and the Caribbean, as well as in Canada.

“We think there’s great growth aspects in the future,” he said. “The companies fit really well together. It’s really creating much more of a global company than two domestic companies.”

Johnson said he and Deitemeyer spent most of the past day speaking with their clients and brand representatives to explain what is happening and why the deal makes sense, noting it was important to make sure they heard it directly and not from a news release. He believes the company will be better able to grow its platform going forward as it creates value for owners through topline revenue and better margins on the real estate side.

The feedback received so far from owners and brands has been positive, he said.

The combined company will operate almost every major brand, and its brand relationships will be incredibly valuable to owners, Johnson said.

“In addition to that, there’s another area we’ve got scale,” he said. “The new currency in our industry today is data.”

The combined company will operate nearly 200,000 rooms and have data from all of the major brand companies, he said. While guest data is important, he said access to data from best-in-class practices and being able to aggregate it and manipulate it on the revenue side and marketing side is going to be a huge benefit.

Both Aimbridge and Interstate are employers of choice, as they have focused on talent acquisition, development and retention, Johnson said. Finding and retaining the best talent will improve performance and create better returns, he said.

Deitemeyer said creating an even larger company from the two will establish a more compelling career path that will aid in recruitment efforts.

“That certainly draws a different level of talent and creates an enthusiasm around the organization,” he said.

The combined company will be able to leverage expertise in many different markets around the world, and better serve multinational investors, of which there are more than ever before, he said.

Scale will help on the procurement side as well, driving down costs on expenses such as food and beverage, benefits and insurance, Johnson said.

“There are so many different areas we can deliver better value to drive down costs and deliver better margins for our owners,” he said.

The two companies will operate separately until the deal closes. During that time, internal and outside feedback will be sought on a name for the new combined entity, Johnson said.

“There is great brand equity in both companies,” he said.

• MORE: Inside the new culture at Interstate Hotels and Resorts
  

Johnson said he and Deitemeyer and their respective senior management teams will work together to mold what the new entity will look like. He added there will be little to no changes for employees at the property level or at the regional oversight level for positions such as VPs of sales and operations.
“All we will do is create better opportunities for employees and managers as they want to matriculate up to bigger and better jobs based on performance,” he said.

As the two companies come together, it will be critical to understand the nuances of each, Deitemeyer said. Even when two companies are philosophically aligned, some differences exist, he said.

“My goal is to understand the strengths of the organizations and how does our vocabulary evolve and how does that translate into action,” he said.

The two companies issued a joint memo to employees explaining the merger and what it will mean for them. It was important that the first communication to employees about the combined organization would have the DNA of each company in it, he said.

“I have a lot of respect for the power of an organization,” Deitemeyer said. “It’s going to be a process. It will be thoughtful.”