ATLANTA — Sticking to a core hotel investment strategy even amid swirling headwinds and uncertainty has proved successful for Rockbridge, and its chief executive is confident that strategy will be successful once again.
During a break at the recent Hunter Hotel Investment Conference, Jimmy Merkel, CEO and co-founder of Rockbridge, acknowledged the uncertainty freezing the U.S. hotel transactions market.
"The underlying demand has been pretty healthy. And now we are dealing with a little bit more unpredictability and the political environment with the new administration and managing that," Merkel said in a video interview. "There's definitely some headwinds being created, at least in the short term, around some of the policies and some of the posturing and positioning that this administration is doing."
But with hotel demand trends still consistent, there's no reason to waver from investing in hospitality given the right opportunity, he added.
"It's our job to navigate those [headwinds] and deploy capital in the right places, and build value over over time," Merkel said. "I think it's probably more of a buyer's market than a seller's market. But, you know, time will tell."
In December, Rockbridge acquired three hotels in Texas affiliated with the Hotel ZaZa brand for $290 million: the Hotel ZaZa Austin Downtown, the Hotel ZaZa Dallas Uptown, and the Hotel ZaZa Houston Museum District. The three hotels will be integrated into Rockbridge's Makeready portfolio, which includes more than a dozen independent, luxury-lifestyle hotels as well as restaurants, bars and coffee shops.
Rockbridge has been building momentum in its capital strategy to invest in independent, luxury-lifestyle hotels for the last decade, Merkel said. The acquisition of the three Hotel ZaZa properties in Texas is the next phase of that strategy.
"It's really going after that customer that wants to have an elevated experience, wants to get integrated into the community or understand and a little higher level of service," Merkel said. "Obviously, and it takes a lot to do that, but the ZaZa brand fit in with our strategy really well, and we're excited about repositioning that and evolving that brand, keeping the essence of what it is, which is a fun luxury brand, but evolving it into ZaZa 2.0 and growing that."
And Rockbridge hasn't shied away from chasing hotel acquisitions that need some renovation work, Merkel said. It's all part of the potential the firm sees in repositioning a hotel.
"We've done over 400 transactions and one of our core competencies is to take properties that have been underinvested in and reposition them," he said. "And sometimes, you know, spending two, three times what we pay for the property to really reimagine a property. So we are always opportunistic. The market is challenging with a bit of uncertainty, and so you really need to price that into the market."
In January Rockbridge hired Mike Deitemeyer as executive vice president and president of its development company. Deitemeyer is the former president and CEO of Aimbridge Hospitality — the largest third-party hotel operating company in the world. Prior to that, Deitemeyer was president and CEO of Interstate Hotels & Resorts — which was acquired by Aimbridge in 2019 — and worked for convention hotel brand Omni Hotels & Resorts for several years, including as chief executive.
Merkel said he and Deitemeyer got to know each other over the years in the hotel business and shared a similar philosophy of the hospitality industry. He added the time was right to add Deitemeyer to the Rockbridge team.
"I got to know Mike about 10 years ago, and we became friends, shared a view of the industry and a passion for development and creating spaces that people want to be in," Merkel said. "That's really what we're trying to do in the lifestyle and luxury space, is create places that people want to be and enjoy and feel good in, and that's something that Mike did a lot at Omni."
With an investment game plan in hand and new additions to its portfolio and executive team, Rockbridge is ready for what comes next. A year ago, the company celebrated 25 years in business and updated its brand with a new look and core tenets. Merkel has been CEO of the Columbus, Ohio-based hotel owner, developer and operator since 2008.
"We've really kept our head down, building a vertically integrated investment company, and never really did a refresh of the brand to coincide with what we had evolved to," Merkel said. "And so it just seemed like the absolute right time to be able to do that and usher in the next 25 years and share with the hospitality industry and with our team exactly who we are and where we're going and why we do what we do."