London-based private-equity firm Henderson Park recently acquired the business and hotel management platform of Amaris Hospitality in December, concurrently creating a new hotel asset management platform named Klarent Hospitality.
Henderson Park, which specializes in hotel real estate, announced the deal with LRC Group for an undisclosed sum in December. Among its hotel assets across various platforms, Henderson Park now has a portfolio of approximately 9,300 rooms in Ireland, the U.K., France, Greece and Spain.
This isn't Henderson Park's first deal with Amaris and LRC Group. In a separate deal announced in October, Henderson Park acquired 12 Hilton-branded hotels with a total of 2,424 rooms across the United Kingdom and Ireland owned by LRC Group and managed by Amaris.
Those 12 hotels, now owned by Henderson Park, will be paired with 18 hotels owned by LRC with all managed by Henderson Park's Klarent Hospitality management division.
In the December deal, Henderson Park did not acquire the name Amaris Hospitality, which will stay with LRC, Klarent Hospitality CEO Peter Stack said. Stack will run the new entity alongside Chairman John Brennan. Both held the same titles at Amaris.
Stack was CEO at Amaris for more than six years, while Brennan, a former CEO, has been at the firm for eight years. Both previously spent a collective 24 years at Ireland and United Kingdom hotel firm Jurys Inn Hotel Group.
Amaris was created following U.S. private-equity firm Lone Star Funds’ January 2015 acquisition of Jurys Inn for 680 million pounds sterling ($931.8 million). Then in 2017, Lone Star sold the business and portfolio to a joint venture comprising Sweden’s Pandox AB and Israel’s Fattal Hotels for 800 million pounds sterling.
Stack said when Lone Star held the reins, there were 85 hotels in its portfolio, which he said Amaris helped grow in value.
He added Amaris has worked before with Henderson Park’s founder and main principal, Nick Weber, who also was a major owner at Jurys Inn before Lone Star stepped in.
“Lone Star sold hotels off in a number of transactions, including 23 hotels to LRC, five Hiltons and 18 Accors," he said. “As part of the deal, LRC wanted to buy Amaris from Lone Star."
In 2018, LRC purchased another seven hotels to grow the portfolio to 30 hotels. Henderson Park owns the 12 Hilton-branded assets, while LRC owns the 18 Accor-branded hotels.
Klarent Hospitality now has a management agreement with LRC.
Stack said LRC had invested a lot of capital into what has become Klarent, especially a sum of more than 3 million pounds sterling focused on real-time information technology.
He added the Amaris name has grown in stature, too, as have many of its assets.
“The DoubleTree by Hilton Islington had 229 rooms as a Jurys. Now it has 381," Stack said. "Two years ago, it had a 5 million [pounds sterling] refurbishment with a new [food and beverage] concept, and its [earnings before interest, taxes, depreciation and amortization] has increased by more than 200%."
Henderson Park will continue such initiatives, Stack said. Renovation plans are in motion for an additional 31 rooms at the Hilton Edinburgh Carlton, 20 additional rooms at the DoubleTree Edinburgh Airport, planning applications for more rooms at the DoubleTree Coventry and DoubleTree Bristol North and refurbishments at the DoubleTree Chelsea, DoubleTree Dartford and DoubleTree Southampton.
Klarent Clarity
In the midst of the deal and creation of Klarent Hospitality, the management company didn't temporarily close any of its hotels, even amid the pandemic. Stack said that has eased the transition and helped operations.
“We made the opposite decision to many [businesses] and kept opened. Not a single hotel closed," Stack said. "We really wanted to keep our people and only put anyone on furlough if we really had to, as we have always believed there was business out there."
There has been plenty of demand to chase, as well, he said.
“The government needed hotel rooms, and there was construction around [the High Speed 2 rail network expansion]. We quickly went to 20%, 30% occupancy and grew from there,” he said.
If a property had been recently renovated, its performance during the pandemic was approximately 30% to 40% ahead of his comp sets, Stack said.
“And we made business contacts we would never have made, so as we enter 2022, with all that and now international business coming back, airlines, leisure tour companies, corporate accounts, we are confident,” he said.
In the fourth quarter of 2021, Klarent's properties received a big boost from the United Nations Climate Change Conference in Edinburgh between Oct. 31 and Nov. 12.
“In October we had 90%, in November 96%, although that was helped by COP26,” Stack said.
Stack anticipates the hotel market will return to 2019 levels by the end of this year or in 2023, and he also sees more assets coming to market.
“Owners were cautious and held on to assets, but fundamentals have reasserted themselves and shown the industry to be very robust industry," Stack said. “People like investing into bricks and mortar, and hospitality is performing far better than retail, office, residential. It will attract new investors, and there will be the return of previous ones,."
He said it is notable that average daily has come back quicker than occupancy.
“The guest was prepared to pay more for a good experience,” he said.
Stack also predicts new highs for the hotel industry will come sooner rather than later.
“By the time we hit 2023 trading, we will be at or above 2019 [revenue per available room] levels,” he said.
He also anticipates Klarent Hospitality will stay aggressive and not stand pat.
“We are active in the marketplace right now, looking to see what we can bring to new opportunities. We are not looking at just having steady trading but the overall performance," he said. “Europe is a target, but the U.K. is No. 1."