ATLANTA — Terrapin Hospitality’s September acquisition of K Partners came at the beginning of a wave of third-party hotel management company merger-and-acquisition activity that shows no signs of slowing down.
Terrapin founder and CEO Tony Sherman said he’s glad the deal happened when it did because doubling the company’s portfolio put it in a good position for optimal scale and efficient management at this point in the lodging cycle.
“I like to think of us as being Goldilocks-sized,” he said in a video interview with Hotel News Now held during the Hunter Hotel Investment Conference. “When you’re very small, you can’t take over more than one or two properties at a time. … and if you’re very big, that has its own inherent problems.”
Terrapin most recently added 17 additional management contracts to its portfolio in mid-March, and Sherman said the company’s current size, at 85 hotels and 9,765 rooms, is optimal “so we can really efficiently manage a lot of hotels for different owners in different markets.”
The company’s third-party management footprint runs from California to Florida, and the portfolio includes limited- and full-service hotels from brands including Marriott International, Hilton, Wyndham Hotels & Resorts, BWH Hotel Group, IHG Hotels & Resorts and Choice Hotels International.
In 2021, Terrapin got a significant investment infusion when Waramaug Hospitality founders Paul Nussbaum and Leslie Ng became investors, and in early 2021, Terrapin acquired a five-hotel portfolio from Waramaug.
Throughout the company’s history, solid brand relationships have been a benefit, Sherman said. He called the brands “helpful and really great,” adding that “if we lost access to Marriott or Hilton, property revenue would drop like it did during COVID.”
In the future, Sherman is focused on riding out the momentum from its strong year.
“Finding owners that might not be happy with their current management company or owners new to the business that need a management company, or investors that don’t manage and are buying properties” is Sherman’s main priority for growing the company’s third-party management business.
Buying hotels is also part of the strategy.
“I started out as an investor, and I think that’s why I’m a good third-party manager because I think like an owner; I am an owner,” Sherman said.
Most recently, Terrapin Hospitality in November bought the Hotel Denver in Glenwood Springs, Colorado, for $15 million and the Hotel Glenwood Springs for $9 million, according to CoStar data.
And finally, more company acquisitions are another avenue for growth, he said.
“There are some smaller management companies we’re talking to where the owner is doing everything himself or herself and is just kind of tired of that,” he said. “And I can say to them, ‘Why don’t you join us? You can be an executive. We have an accounting department and an HR department and an e-commerce department; you don’t have to do that stuff.’”
For more from Terrapin Hospitality’s Tony Sherman, including how the company is dealing with labor issues, watch the video above.