ATLANTA—Interstate Hotels & Resorts’ latest portfolio signing is yet another foot forward in its quest to conquer Europe.
The third-party manager on 1 April announced it had signed 18 management agreements for a portfolio of U.K. hotels owned by an affiliate of Cerberus Capital Management. Interstate’s U.K. division now comprises 59 hotels, including signed pipeline.
Beyond that, it signifies a continuation of the strategy to grow its European footprint by leaps and bounds in Europe, according to Leslie Ng, chief investment officer.
“About two, three years ago, we made a concerted effort to target Europe as a growth vehicle for us,” he said during a break at last month’s Hunter Hotel Conference in Atlanta. “The main thing we did was acquire two smaller management companies, combine them and make them Interstate U.K. That’s really our launching pad for growth in the U.K. and, by extension, Europe.”
In 2013, Interstate acquired Liverpool-based Sanguine Hospitality (14 hotels comprising approximately 1,900 rooms) and Glasgow-based Chardon Management Limited (32 hotels with 3,414 rooms).
The company now has two offices in the U.K. (Birmingham and Glasgow), one in Amsterdam and one in Moscow. Interstate’s European portfolio and pipeline now count more than 80 hotels, Ng said.
The current footprint extends to 13 European countries. Ng, for one, wants more.
“We’ve only touched the tip of the iceberg in Europe. We have not hit major markets like Italy, France or Germany yet, but we will,” he said. “The landscape is wide open geographically on the mainland.
“We think the markets are ripe for a solid third-party manager.”
Ripe for franchising
“The management business in Europe is still fairly parochial, fairly fragmented,” Ng said of the hotel landscape in Europe.
That’s where Interstate comes in, he said.
“Historically, most of the hotels are brand-managed. A large percentage of the hotels are independents as brands become more prolific. But as the brands are backing out into their broader spectrum of their sub-brands, they actually welcome companies like ours to help them grow,” he said.
The result is a hotel industry where third-party operators, once shunned, are being welcomed with open arms, Ng said.
Interstate’s executives are doing their part to spur progress along.
“We work with capital sources that we work with here in the United States, and we’re helping them acquire hotel real estate in Europe,” Ng said. “We’re giving them the confidence that they know their hotels will be well-run when they’re bought.”
He attributes Interstate’s size and versatility as a key selling point.
“We operate in every segment, every product,” Ng said. “We operate almost 50 brands across the globe. We’re one of the few companies that can do anything anywhere.”