The hotel industry has gone through something of an identity crisis in recent years.
Ever since Aimbridge Hospitality's 2019 purchase of Interstate Hotels & Resorts, which created a third-party hotel management super platform never seen before in the industry, there has been an ongoing debate about what's the most important aspect of operating in the hotel business: the power of scale or the value of a one-on-one relationship.
Not surprisingly, after the creation of the Aimbridge-Interstate super tanker, many smaller hotel management companies used that debate specifically as their selling point. Yes, this new version of Aimbridge has access to goods at lower prices, has more heft in negotiations with groups such as online travel agencies and has a significantly greater pool of talent, but they can't give you the same type of focused and individualized attention, these hoteliers would say.
So yesterday's news that Aimbridge — in a move to significantly pare back its $1.3 billion in debt — would be handing over a majority ownership stake to its lenders might be a sign for some that indeed small and focused beats big and powerful in hotel operations. But that would be a drastically oversimplified reading of news.
To be fair to Aimbridge, current CEO Craig Smith has been extremely open about the fact that relationship-building and management with owners would be the key defining feature of his leadership at the company. And it's not like the issues created by its own scale were the only or even the chief issue Aimbridge executives have had to contend with over the past five to six years. I don't know if you heard, but it was pretty difficult in hotel operations in 2020 because of the COVID-19 pandemic.
In the end, Aimbridge will continue to operate, albeit with a different ownership structure in order to significantly reduce its own debts. There still should be huge advantages to having a massive platform — more than 1,000 hotels in 23 countries — to leverage. But for at least today, the relationship-first crowd should be feeling pretty good about their approach to the hotel business.
Let me know what you think on LinkedIn or via email.
(Corrected on Jan. 17 to specify Aimbridge Hospitality's portfolio size in the sixth paragraph.)
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