PM Hotel president explains Sightline, other management deals

CHEVY CHASE, Maryland – Inside the past 10 days there have been five management company mergers or sales – one more transactional with PE firm KSL Capital Partners cashing out on Davidson Hospitality Group, and the others more likely driven by the need to generate greater efficiencies and add talent to manage growth.

Among the deals was Chevy Chase, Maryland-based PM Hotel Group, who announced a merger with lifestyle management company Sightline Hospitality, marking a significant development in PM Hotel Group’s lifestyle hotel division Modus by PM Hotel Group. The deal added 22 properties to PM’s portfolio of now 85-plus hotels that are either open or set to open within the coming months. It also gives it greater geographic diversity, especially on the West Coast.

Additional deals for PM are in the works in Lake Tahoe, Austin, Greensboro, Philadelphia, Orlando and a few other markets. PM Hotel Group President Joseph Bojanowski told Hotel Investment Today that perhaps a dozen new deals – some smaller, experience-driven properties – can get done within the next six month and he alluded to one particular deal that could be even bigger.

When asked to explain the recent rash of management deals, Bojanowski said that it's very difficult for smaller companies to provide the depth of talent, expertise and services required to not only survive, but to thrive in this environment.

“When you look at what continues to happen in the capital markets and the pressures that are coming around everything from DSCR tests (debt-service coverage ratio) to refinancings and everything else, premium performance is a minimum requirement,” Bojanowski said. “You need depth of experience and support across every element of the hotel operation to be able to deliver for an owner. There aren’t any more silver bullets left on the revenue or expense side, making premium performance super nuanced.”

Sightline's Dr. Wilksonson’s Backyard Resort & Mineral Spa in Calistoga, California

So, at the end of the day, Bojanowski said finding best-in-class talent needed to support excellence has likely resulted in more mergers and acquisitions among management companies.

And for PM Hotel Group, Bojanowski said being a private company without an overlording parent company allows it to better manage growth and the pressures that come with it. He said that also gives comfort to owners who want closer, more personal relationships with their managers.

“We’re feeling pretty good about this size,” he said. “I don’t know that you get a tremendous additional benefit for being 300 over 100 because the ratio of support to hotels is probably the same.”

PM’s strategy

The newly merged entity will continue to operate under the PM Hotel Group name, with plans to seamlessly integrate Sightline Hospitality's approaches as well as a majority of its executive team.

The 22 hotels are predominantly in new markets with some in existing PM locations. The hope is to better serve existing owners in a more efficient way to deliver services and provide a deeper level of market expertise to drive demand. Bojanowski estimated that benefits of scale could reduce costs in the 500-basis point range for hotel EBITDA, depending on the size of the property.

“What we know is the environment coming up in 2025 where we expect to have low single-digit RevPAR growth that is growing slower than expenses, which requires market expertise and critical mass to deliver more cost-effective services,” Bojanowski said.

He also pointed to PM’s commercial strategies team, which he said runs significant RGI premiums.

Evo Salt Lake City joins PM Hotel Group's portfolio

“Where we’re really going to make the difference is the depth of experience we bring with driving rooms revenue, bar and restaurant revenue, ancillary revenues, and then driving them through the most cost-effective channels to make the cost of customer acquisition go down even more significantly,” he said.

Bojanowski also referenced emerging Gen Z travelers who prioritize experiential stays. “Because the Sightline team possesses a deep level of expertise in this area, we think it can give us a first-mover advantage. We think this segment is fragmented at this time and it is a great opportunity to take advantage of this demographic shift,” Bojanowski said.

Bigger picture, the plan is to give owners and developers more ability to focus on buying and developing assets – with PM’s assistance, of course. “Some of these new [Sightline] markets are very focused on, or well positioned to take advantage of the travel trends that are going to be in place for the next 10 to 15, years, and in markets where people want to be,” Bojanowski added.

At the end of the day, Bojanowski said the transaction will be accretive and valuable to all impacted parties. “It will provide opportunity for the associates on the Sightline team. It will provide better returns for the owners. And it will provide better scale and opportunity for the existing owners on the PM Hotel Group side.”