Nothing happens in a vacuum, with every action creating a ripple effect that leads to further actions down the line.
Crestline Hotels & Resorts, which celebrates 25 years in third-party hotel management this year, is the result of such a chain of events.
The origin of Crestline goes back to 1993 when Marriott Corp. split into brand management company Marriott International and Host Marriott Corp., which is now the real estate investment trust Host Hotels & Resorts. Host spun off Crestline Capital, also a public company, which operated for more than three years as an ownership company. The executives there decided they wanted to self-manage their owned portfolio, so they created Crestline Hotels & Resorts in 2000, said James Carroll, president and CEO of Crestline in a podcast interview with CoStar News Hotels.
Crestline Capital ended up going private when it agreed to be acquired by Barceló Hotel Group, a Spanish hospitality company, in 2002, he said. Crestline Hotels & Resorts has been part of Barceló ever since, though for a period of time the company was under shared ownership until Barceló fully reacquired it in 2017.
“We joke sometimes that we’re like a grandchild of Marriott if you go way back to our roots, but that’s what kicked things off,” he said.
Crestline started with a management portfolio of about 20 hotels and fewer than 5,000 rooms. Today, it operates more than 120 hotels and 17,000 rooms, he said.
Carroll joined Crestline in 2004 as senior vice president and treasurer before being promoted to chief financial officer in 2006 and president and CEO in 2010. Prior to his career at Crestline, he served in the U.S. Navy for about 10 years and was a fighter pilot. After his military service, he held several executive positions at computer company Dell before moving to Crestline.
“It's in some ways very exciting, just as exciting — just in a very different way,” he said, referring to his years as a Navy pilot. “But there are some comparisons. I'd say the third-party management business is highly competitive, and so having a good competitive spirit, I think, is very helpful in trying to operate a third-party management company. There's a lot of competition, and we need to prove ourselves every day to the owners we work with, which is no different than manning up and launching on a mission every day.”
When Crestline started, brand management was pervasive in both in the full-service and select-service hotel segments and third-party management was still pretty new, Carroll said. Many of the third-party operators started with experienced executives coming out of the brand management space or owners who self-managed. Even so, they were generally relatively small.
Over time, the hospitality industry's third-party management companies started to show their value as they moved toward specialization, he said. Many pure-play hotel owners are not hospitality specialists, and sometimes they invest in hospitality just to divest their investments. Others are specialists, such as the hotel REITs, but each like to work with third-party operators because they focus fully on the management business.
“It's been a very exciting evolution, and now we see a good amount of consolidation in the management business, certainly at the higher tiers, creating much larger management companies,” he said.
Even though both Crestline and the hotel industry at large have changed over the past 25 years, some things endure, Carroll said. One of the key aspects for Crestline is that it has always focused on having strong regional leadership, strength and coverage.
The company’s regional operations, sales and revenue teams have some of the longest tenures in the business, he said. The average tenure on the regional operations teams is 10 years with the company, and the sales and revenue teams are close to 15 years.
Many of Crestline’s competitors have modified their models and shrunk their regional oversight teams, but Crestline kept its staffing of oversight teams to limit the number of properties they each have to supervise, he said.
One of the company’s greatest strengths is that keeping a healthy and skilled regional team means “that our hotels are being touched, seen, talked to regularly by experts that can guide those property teams and drive the best results,” he said.
The other focus is on the teams themselves, Carroll said. Hospitality is a people business, especially on the management side.
“So yeah, we're trying to drive value for our owners in the products that they have entrusted us with,” he said. "But for us, it is people serving people, and that is what drives the business and what drives the revenues and return customers and guest scores.”
For more from CoStar News Hotels' interview with Crestline's James Carroll, listen to the podcast embedded above.