ATLANTA—Dave Johnson hit the gas pedal at Aimbridge Hospitality in 2003 and has no plans to decelerate any time soon. The Plano, Texas-based company’s president and CEO aims to aggressively add to its portfolio, and hopes to include an international component to the mix.
Aimbridge’s growth will come from all regions of the United States—and beyond, Johnson said during an interview at the recent Hunter Hotel Investment Conference in Atlanta. The value of individual opportunities will trump any geographic preferences for expansion of the 13-year-old company.
“As we look at opportunities geographically, we’re not really driven as much (by that) as we are driven by if we see an opportunity we like,” Johnson said.
With the exception of a handful of properties in the Caribbean, Aimbridge’s hotels are located throughout the U.S.
“We would love to get into the U.K., and really Europe in general,” Johnson said. “We see a lot of opportunity there.”
Johnson said he came close to closing a deal for a Europe-based company with 77 hotels on its roster, including a number of boutique and independent properties.
“We got through diligence, and we just felt like it wasn’t a good fit,” he said.
Aimbridge would like to find a portfolio of hotels in Canada as well, the executive added.
Management is its primary function
The company has 455 hotels comprising more than 63,000 guestrooms open or under development. While its primary role is being a management company, Aimbridge has a financial stake in 50% to 55% of the properties it manages, Johnson said.
|
Dave Johnson, Aimbridge |
“When you manage for high net worth or private equity, a lot of times those guys … like you to have skin in the game,” he said.
Aimbridge could invest in more of its properties, but the real estate investment trusts it works with prefer to not have a financial partner, he said.
Aimbridge focuses on three types of assets:
- Full-service hotels that have brands such as Hyatt, Marriott, Hilton, Embassy Suites, Westin and Sheraton. This is the company’s primary focus that comprises more than 85% of the portfolio.
- Premium select-service hotels that are affiliated with brands such as Courtyard by Marriott, Hilton Garden Inn, Hampton by Hilton and Fairfield Inn & Suites. The 50-plus hotels comprising more than 4,000 rooms in this segment are operated by Channel Point Hospitality, an affiliate of Aimbridge.
- Resort hotels. It has 12 such assets—half of which are all-inclusive.
Aimbridge typically invests 5% to 10% of the equity for a deal; in 2015 it invested approximately $20 million, Johnson said.
Operating teams at individual hotels often don’t know if the company has a financial stake in the property, he added.
“That’s the way I’d like it to be,” he said. “Whether we’ve got 5 or 10% of the equity, managing for a public or private REIT or for a high net-worth individual where we don’t have a co-investment, we should provide the same service.”
Renovation programs are a hot topic
Renovation programs are a key ingredient to Aimbridge’s management approach, Johnson said. It has embedded such a program with the Embassy Suites hotels in its portfolio.
“You look at risk reward of the capital stack—we’re buying some of these Embassys that are 30 years old; they still have the koi ponds (in the atrium). They still have the greenery and the forest and whatnot,” he said. “We’re able to buy these assets at a ridiculous price (at) one-third, 45% of replacement cost to buy land and build a new one there. It’s in a great location, and we probably put equal as much per key into the asset.
“We’re bulldozing the lobby; we are tearing the place apart,” he added. “We’ve done about 10 of them now, but the finished product is absolutely state of the art.”
That kind of commitment can pay big dividends, and in this case it resulted in Hilton extending a license agreement for longer than it originally offered, Johnson said.
“The first one we did at Dallas market center, Hilton only gave us a 10-year license agreement, which we were a little concerned about because we’re putting a lot of money—we were putting $8 (million), $9 million in this hotel,” he said. “When they saw the end result, they came back and on our subsequent projects it’s a 15-year license agreement because they were so ecstatic with the end product.”
What Aimbridge likes from brands
Regardless of the investment structure, Aimbridge chooses brands carefully, Johnson said. Distribution platforms, owner-brand relationships and innovation are three key elements that attract the company to a brand.
The innovation aspect is becoming more important, he said, citing Hilton Worldwide Holdings’ decision to be the first company to offer its lowest room rates to its loyalty club members as a prime example of innovation and leadership.
“They asked their owners and operators to back them on this, and I think we got to a place that’s a very good place for everybody involved. So when you look at brands, who’s willing to take a little risk and be a little more innovative? Marriott’s following suit right now, and I really applaud them for doing that,” Johnson said.
The move will score big points with business travelers, who are a primary source of business for the majority of Aimbridge’s properties, Johnson said. He said those travelers will take notice when they get points, benefits, upgrades and free Wi-Fi.
“They’re going to start booking direct as opposed to shopping the internet to see where (they) can get the best rate,” he said.
The independent factor
Aimbridge isn’t all brand-driven, Johnson said. The rise of independent hotels during the past decade has been driven by electronic distribution channels and presents a big opportunity for the company. Independents account for approximately 10% to 12% of Aimbridge’s total room count, he said.
Aimbridge acquired Evolution Hospitality in 2015 to beef up its approach to independent hotels. He said the company has its own in-house agency and e-marketing department for advertising, collateral and creative.
“It’s a real competitive edge,” Johnson said.
“Running a 250-room Hilton and running a 250-room independent is very different,” he added. “We’ve learned a lot from (Evolution), so we’ll continue to acquire talent. But I think from a growth perspective it’s going to allow us to grow that part of our business tremendously.”
Aimbridge has achieved better than 20% compounded annual growth for eight consecutive years—something Johnson said he knows is difficult to maintain as the industry’s economic cycle begins to slow. Keeping his talented team in place is the primary way to maintain the track record. He has only lost one VP-level employee since the company launched in 2013.
“We work hard, but we have a lot of fun,” Johnson said. “The mantra of my organization is we don’t like to lose, but it’s very much a family environment. We challenge each other, it’s very collaborative.”
It also filters to the property level. In 2015, 93% of the open 59 general manager positions were filled internally, Johnson said.
“I don’t like recruiting externally,” he said. “If I have a new hotel that we’re taking over, I’d much rather put an experienced Aimbridge general manager in that hotel.
“But then if I can take a young person that has good training and I can put them in an existing Aimbridge hotel with all of that talent around them to learn on the job. We’ve had a lot of success doing that.”