Remington Hotels, a third-party management platform owned by Ashford Inc., has announced the acquisition of Chesapeake Hospitality for up to $26 million.
Remington's portfolio will grow to 121 properties across 28 states and represent 25 brands and several independent properties, including the 877-room Showboat Atlantic City. That property will be the largest in Remington's portfolio.
The deal is part of a strategy to grow the management firm's portfolio beyond Ashford-owned properties through hotel real estate investment trusts Ashford Hospitality Trust and Braemar Hotels & Resorts.
Remington President and CEO Sloan Dean said in January that 2022 would be the year his company acquires another third-party management firm to boost its overall scale. He also noted, at the time, that his company is unlikely to go on a buying spree.
"I don't want to buy three or four [other companies] where we get distracted from actually operating," he said at the 2022 Americas Lodging Investment Summit. "And I think that's what's happening in some of the [mergers and acquisitions] in third parties where you have these companies that are just so fixated on mergers and acquisitions that they are actually not operating really well."
Prior to the deal, hotels not owned by related companies made up 20% of Remington's portfolio. With this deal, that figure jumps to 40%.
According to a news release from Ashford Inc., the deal is structured as a $15.75 million initial payment for Chesapeake, including $6.3 million in cash and $9.45 million in preferred Ashford stock. Chesapeake's management team has the potential to earn as much as $10.25 million more based on the company's management fee contribution over the next two years. To earn the full compensation, the legacy Chesapeake portfolio would have to contribute at least $5.3 million in earnings before interest, taxes, depreciation and amortization by 2024, which would represent a 4.9-times multiple on the deal.
"Though the hospitality space has faced massive challenges over the past few years, Remington has remained steadfast in its commitment to being the best hotel manager in the industry," Dean said in the news release. "By melding Chesapeake's culture and know-how with ours, we believe we are well-positioned to cultivate even stronger relationships with our properties' owners by providing them with more resources, better economies of scale, and a more satisfying guest experience."
Chris Green, who served as president and CEO of Chesapeake, will move into the role of division president for Remington, a company he praised in the news release for its "stellar results" and for making "a real cultural shift in the hotel management space."
"This partnership will be a practice in blending two companies that have operated in different geographical lanes and have a steadfast commitment to doing what is best for their clients and employees," he said. "I'm looking forward to taking the service our clients know and love to the next level as we access the resources Remington has to offer."
The combination of Remington and Chesapeake is the latest in a wave of mergers and acquisitions among third-party hotel operators, including Benchmark Pyramid's newly announced agreement to acquire Provenance Hotels' portfolio of 12 independent properties for an undisclosed price. Other deals in recent months include Aimbridge Hospitality's acquisition of Prism Hotels & Resorts, the merger of Pyramid and Benchmark into Benchmark Pyramid and Terrapin Hospitality's acquisition of K Partners.