Consensus: Management consolidation will continue

NATIONAL REPORT – The management company consolidation trend is expected to continue in 2025 – mostly by mid-sized regional companies looking for scale and new locations picking up smaller operators and taking over for owners who managing more properties than they’d like. While some observers see this as healthy, they also admit to being painfully aware of the challenges and potential pitfalls of becoming too big and trying to be everything to everyone.

“It’s hard to be a one-stop solution for every type of product, which I think is where some of the bigger companies have had challenges,” said Mark Keiser, head of development for Viceroy Hotels & Resorts, which is predominantly owned by big owner-operator Highgate. “When you are a prolific select-service hotel manager, and you’re trying to be a prolific luxury lifestyle operator and a middle of the pack upscale operator, you have to be really thoughtful about how you structure your organization so that you can be best-in-class in different product types, while still getting the benefit of a large-scale employee base and back-of-the-house of resources.”

When you are a prolific select-service hotel manager, and you’re trying to be a prolific luxury lifestyle operator and a middle of the pack upscale operator, you have to be really thoughtful about how you structure your organization so that you can be best-in-class in different product types, while still getting the benefit of a large-scale employee base and back-of-the-house of resources.

Mark Keiser

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Keiser noted how Highgate has been concentrated in certain markets with, for example, about 15,000 hotel rooms in New York City under management. “Real scale in a market like New York takes a very specific expertise, and once you’ve cracked that code, adding additional properties is very symbiotic and powerful. But that sane skill set doesn’t necessarily translate to the Florida Keys, where we have a different team running hotels. Scale matters there too, particularly from an employee perspective.”

Alessandro Colantonio, chief investment officer at Miami-based Gencom, which owns third-party management company Pyramid Global Hospitality, said, “There’s a fine line between sticking to what you know and what makes you a good operator. Is bigger, necessarily better? I’m not sure about that in the third-party managed space because if you want to be someone that focuses on a certain segment, where you’re the best operator, you need to be careful that you don’t grow too fast, and you don’t grow outside of your expertise.”

Colantonio said they want to continue to grow Pyramid Global through new contracts – more organic growth through relationships. “It’s going to be really targeted M&A,” he said, citing Hamilton Hotel Partners, their affiliate in Europe, recently merging with Axiom Hospitality.

“We saw a really good fit between the two parties,” Colantonio said. “We didn’t think it was growing too much, too fast, and we’re very excited to grow that platform in the U.K. and Europe.”

Raines Company Managing Director Grey Raines said he thinks it’s going to be another big year for management company consolidation, adding in December that they were working a couple of acquisitions, albeit on the smaller side, to grow outside their core markets.

“With the successful integration and acquisition of HP Hotels, it has given us another avenue to grow, and we like the opportunity,” Raines said. “We looked at a couple this year that did not pan out, and I think that you have people kicking tires to understand exactly what that commitment means to purchase another management company.”

It’s still an agreement-by-agreement endeavor. So, I struggle with how you’d go about valuing something that remains so fluid. Groups that were going for scale found that out, maybe the hard way, on the transient nature of management contracts, especially in a model where generally they’re unencumbered upon sale with performance termination tests that kick in more readily in a daily lease nature.

Dustin Fisher

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Raines attributes the ongoing acquisitive environment among management companies to the overall bullish stance of the hotel industry. “People are going to try to find opportunities to grow and consolidate, and without a doubt, there are opportunities for efficiencies.”

Some of the M&A could be out of perceived necessity. “You need it to create pricing power, utilize technology and get the best people,” Raines continued. “We’re excited about the team we have in place that has come together through the acquisition of HP Hotels and our legacy Raines folks who have created a team that we feel we can really take care of anyone in the industry…But we’re not trying to be all things to all people. We’re still focused on a select group of partners and folks that are committed to having the best assets in their markets.”

What concerns Noble Investment Group Senior Vice President Dustin Fisher about this flurry of management deals is how to underwrite the feasibility.

“It’s still an agreement-by-agreement endeavor. So, I struggle with how you’d go about valuing something that remains so fluid,” Fisher said. “Groups that were going for scale found that out, maybe the hard way, on the transient nature of management contracts, especially in a model where generally they’re unencumbered upon sale with performance termination tests that kick in more readily in a daily lease nature.”

But there’s nearly consensus that beat will go on with more consolidation seemingly inevitable.

Brian Hughes, executive vice president of business development at Twenty Four Seven Hotels, said they were involved in a management company sale not too long ago, and just the amount of interest In that particular management company surprised them. “So, just given that, and ultimately the price they paid, showed us that the trend will certainly continue,” he said.

Bryan Postema, COO of Driftwood Hospitality Management in Miami, added that they have quietly been in talks with other management companies, but perhaps not as frequently as the past couple of years. “Overall, 2025 will be a continuation of 2024,” he said. I don’t think you’re going to see any major deals, but it’s more of the smaller companies out there.”