An attractive and complementary portfolio of properties isn’t the only deciding factor when it comes to third-party hotel management company mergers or acquisitions; it’s about the people, too.
Rob Leven, chief investment officer of TPG Hotels, Resorts and Marinas and The Procaccianti Companies, said TPG had a lot to consider as executives planned a move into third-party management, and leadership was a big part of it.
“Our history has been as an owner/operator, so as we were looking to position ourselves in the third-party management business, finding a company exclusively in third-party management was important for us,” he said. “But we also were looking for leadership succession at the top of the management company itself. That wasn’t easy to identify or find.”
TPG found its match in Marshall Hotels & Resorts. TPG’s acquisition of the Maryland-based third-party management company led by President and CEO Mike Marshall closed at the end of December and was announced Jan. 25.
“Mike’s track record and reputation, personality and culture of the company were what we were looking for,” Leven said. “They’re a sizable, well-run company of exclusively third-party managed hotels with a strong leader at the top who was interested in being a leader of the combined businesses.”
Leven and Marshall shared details about the deal with Hotel News Now at the recent Americas Lodging Investment Summit.
The people factor played into Marshall’s view of the deal as well.
“I had been feeling like we were getting stale,” he said, adding that Marshall Hotels & Resorts had been really busy adding third-party management contracts, but spending too much time on a percentage of owners who weren’t prepared for the realities of the hotel industry, especially during a pandemic.
“That doesn’t bode well for the future,” Marshall said. “I have two of my own kids working for me in the company and I didn’t see them going down the same path we were pursuing. The way I look at it now, we’re going to be able to run the best properties, have some of the best clients and be able to hire some of the best talent. It’s going to be fun again.”
Portfolio and Expansion
Marshall will serve as president and CEO of TPG Hotels, Resorts and Marinas. The management portfolio includes more than 130 properties in 26 states, comprised of nearly 20,000 rooms. TPG is the hospitality management affiliate of Rhode Island-based real estate investment and services firm Procaccianti Companies.
Prior to the Marshall acquisition, the TPG hotel portfolio included a mix of properties branded under major flags from Marriott International, IHG Hotels and Resorts, Hilton and Wyndham Hotels and Resorts, plus a good number of independent hotels and resorts, including ONE11-French Quarter in New Orleans, Postcard Inn St. Pete Beach in St. Pete Beach, Florida, and others.
“TPG has iconic properties that we really want to manage,” Marshall said, citing in particular the InterContinental Kansas City in his hometown of Kansas City, Missouri. “Plus they have a lot of independents and unique properties, and we’ve always had a diverse portfolio as well.”
Leven said expansion for the newly combined company will be “quality-oriented growth, not determined by a set number every year.”
“The combined portfolio now is really diverse,” he said. “We have strong concentrations in leisure-oriented independent hotels now. We’ve been building resources on the management side for those assets, and have built a nice little niche and expertise in that area, but we also have many full-service Marriotts and Hiltons, so we can look at almost any management assignment and be competitive.”
Leven and Marshall also said adding investment money isn’t off the table, if the deal calls for it.
“We’ll be able to do that on a selective basis,” Leven said, with Marshall adding it would be “for the right owners.”
Growing a Culture
Leven and Marshall said culture is everything when it comes to building a sustainable, successful third-party hotel management company.
“Long term, building a culture, particularly in a third-party management company, is a really big deal,” Leven said. “It’s not quite as big of a deal when you’re a smaller owner/operator, but now that’s a long-term goal for us to continue to build that really strong culture.”
Marshall has been meeting with hotel general managers and visiting properties to talk about the company’s management philosophy, and to open the floor to feedback.
“We’re a proactive company and we try to get ahead of issues that might arise,” he said. “TPG is doing great stuff, too, so we’re looking at taking the best of both companies and marrying them.”