CEO Craig Smith said owners are more welcoming after the
management giant admitted their mistakes and created balanced scorecards to
address them.
LOS ANGELES – Aimbridge Hospitality had two problems – too much
debt and a damaged reputation for overextending itself and taking their eyes
off serving owners. Even though many investors were hurt, the first problem was
solved in mid-January with first and second lien lenders converting more than $1.1 billion
in debt to equity and infusing $100 million in new capital.
Now, says CEO Craig Smith, his attention is completely
focused on operations with a goal of proving to the hotel industry that
management scale does matter, and that Aimbridge can treat owners as if they
are a small operator. But make no mistake, Aimbridge is still big with some 1,100
hotels under management, having lost about 23% of their properties over the
past two and a half years, according to Smith.
A lot of owners were really surprised when I would visit them and say, ‘we screwed up this, this, this and this.’ But I don’t know that unless I admitted it – and our teams talked about it – there was a way we were going to fix it.
Craig Smith
Smith told Hotel Investment Today during an interview at
ALIS last week that 90% of the problem on the operations side was simply not
doing what they were being paid to do – drive and deliver results with the best
talent. There was too much pride surrounding Aimbridge’s size, too much
emphasis on dealmaking, Smith continued, which means nothing to existing owners.
There was not enough focus on the day-to-day blocking and tackling.
“We’ve identified where all the problems are, and we’ve
really been open about it,” Smith said. “A lot of owners were really surprised
when I would visit them and say, ‘we screwed up this, this, this and this.’ But
I don’t know that unless I admitted it – and our teams talked about it – there
was a way we were going to fix it.”
Now, a new strategy has been set, which includes a “New Year’s
Eve gift” from lenders who Smith said looked at the new management team, saw
green shoots and decided they wanted to own Aimbridge and participate in the
upside. For the moment, Smith said, no IPO is being talked about.
Renewed focused on deliverables
Leadership has built balanced scorecards up and down the
organization to quickly identify who’s performing and who isn’t.
“We’re a big company and sometimes people get promoted
because they manage up well versus really delivering results,” Smith said. “When
we have these performance reviews once a month, we are force ranking leaders on
who’s improved guest satisfaction the most, on market share, on GOP margin.
That’s led us to be able to identify quickly who’s performing and who isn’t… It’s
no longer about managing up. It’s about managing for the hotels.”
We were in the penalty box for a while. No one was offering us deals. Now we even have other folks coming to us and saying, ‘We hear you guys are moving in the right direction. We’d like to do something.’
Craig Smith
Smith said Aimbridge has also identified where it wasn’t
properly using its scale – the owners’ bottom line and talent. New systems are
now in place, but the results still weren’t coming fast enough for an admittedly
impatient Smith. However, he said, since the last quarter of 2024 the indices and
measurables are starting to move in the right directions.
“Our meetings at ALIS this year compared to last year are so
much nicer,” Smith said. “My meetings six months ago were brutal. I’d never
been beat up that much in my life. Now to see people with smiles on their faces
talking to us about deals means that they’re feeling like we’re getting to the
right place… We were in the penalty box for a while. No one was offering us
deals. Now we even have other folks coming to us and saying, ‘We hear you guys
are moving in the right direction. We’d like to do something.’”
Next, Smith said he is waiting till mid-year to show off
comparable year-over-year data that reflects improving performance to drive
more deals.
In the next breath, Smith said Aimbridge has to be choosier
about dealmaking. “We were doing deals with everybody and everything,” he said.
“That doesn’t work. We have to be disciplined on how we grow.”
One place growth can explode is in the international arena,
where Smith said Aimbridge’s reputation is very good.
“We do very well in Europe. We were just patted on the back
by Accor when they gave us a portfolio of hotels because they love us in Europe,”
he said. We’re getting phone calls left and right because international is
popping like it did 25 years ago.”
Not wanting to make the same mistakes it made in the U.S.,
Smith said Aimbridge will for now focus on the Gulf, Southeast Asia and Japan. “If
somebody came to us with a huge portfolio in India, I’d say okay, but I’m not
going to go for four hotels in India, four in China and three in Australia. We
would just stretch ourselves too thin.”