Pyramid’s Fields: Disruption creates opportunity

BOSTON – Pyramid Global Hospitality added 59 properties to its portfolio last year and never performed better operationally than in 2022, reporting a 40% increase in same-store revenue with a 60% flow through to its net operating income. This comes a year after a significant merger with Benchmark Global Hospitality. So, what does it do for an encore?

Hotel Investment Today recently sat down with Pyramid Global CEO Warren Fields as the company moves toward another milestone – 250 hotels in the owned and managed portfolio – to talk about the issues, opportunities and challenges of the moment.

Hotel Investment Today: What’s your take on what is happening with banks, and how do you see it impacting the hotel business, especially M&A?

Warren Fields: The way I view this whole bank thing is that there is no more normal. Between COVID, inflation, this bank crisis maybe won’t become a huge crisis for economy in the U.S. – it’s just going to be a steady state.

The way I view our industry right now is people are traveling and it looks really good through the first and second quarters. There’s no sign of things slowing down from a travel perspective… However, group business is very short term – month-to-month, 10 days even. But pace is really good. I do get a little nervous when we talk recession, but we are not there. We’re not seeing any signs of it yet… And there is no doubt in my mind that people have come to the conclusion that post-pandemic, face-to-face meetings are much better.

HIT: What about the state of M&A and ability to refinance debt?

WF: We were able to refi our corporate debt in December and our partners at TZP did a masterful job in helping us do that, setting the company for the next couple of years on some solid financial footing. That freed up some cash, cleaned up some complexities on our balance sheet and I feel really good about the future of our organization.

I always think there will be M&A but today it is difficult to do so. Given the debt markets, it’s difficult to refinance a hotel. I’m not trying to avoid your question. It’s just the realities of today.

For us, if we can find something that’s interesting, that fits a hole geographically or a segment that we’re not in, we’ll spend time on it. Remember, there’s $13 billion of hotel loans coming due this year.

Warren Fields

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HIT: Has the banking crisis made it even tougher, and have you changed your strategy at all?

WF: In my world, when there’s disruption that creates opportunities. But this potential banking dislocation may not materialize too much… Given what happened with SVB, First Republic, Signature banks, I think most lending institutions will be cautious about what they’re doing in the near term. So, that will clearly just sort of slow things down... For us, if we can find something that’s interesting, that fits a hole geographically or a segment that we’re not in, we’ll spend time on it. Remember, there’s $13 billion of hotel loans coming due this year.

HIT: How is your strategy evolving from an acquisition or disposition standpoint?

WF: The one constant in our strategy from a growth perspective is that we want to be involved in hotels where the operations team can win. Growth for the sake of growth is not always the right strategy.

HIT: You produced outstanding flow through in 2022. What was the key to success?

WF: Becoming more of a data driven company from labor management, to purchasing, scheduling, particularly on top line driving revenue. We’re using data to help us manage the middle of the P&L better.

We’ve been able visualize a lot of data that before our operating teams had to go through reports and get the data. Now, we have a central repository where operators literally can hit one button and see what they need to see. We have cut significant man hours from a reporting perspective and now our teams can review the information versus actually having to put it together. That means they’re thinking about the property’s future versus spending time going backwards trying to gather the information. They’re planning more, spending more time on the floor, making more sales call. That is what changed significantly our ability to drive flow through.

HIT: Update us on the merger, your biggest learns and takeaways.

WF: The merger has been fantastic for the organization… We used to think we were pretty good at independent luxury lifestyle, but legacy Benchmark is really good at that, and we’ve learned some things, especially about revenue generation through the central reservation office.

Otherwise, I would be lying to you if we didn’t stub our toes on a couple of things. But, you know, it was more about Warren Fields telling people to go fast… Communication wasn’t where it needed to be… As you get larger you have to have some guardrails to hold people accountable. So, there is some change. That’s the one constant in our business.

Pyramid Global's Cambria Columbia in South Carolina

HIT: You acquired Provenance Hotels last year. What is the plan moving forward?

WF: Now we’re in Portland and Seattle in a big way. We made a statement in the Northwest… I think that gives us a really good story to go after some other regional type organizations, or at the very least bring some of our tools to potentially some other, older managers that may want to be associated with us… We have a lot of resources there now. So, we can absorb more properties there. We could probably support another 20 hotels up there.

HIT: Do you see potential in some other verticals or hybrid concepts?

WF: We have this program called Access, where we can take some of our tools. And because some owners don’t necessarily want to give up the management of their properties, we can bring a national sales organization. We have 3.5 million customers that we market to on an annual basis, and we already have a handful of property owners who are using it. I think it is a vertical that we can explore and expand.

HIT: There has been a lot of talk lately about the economy segment. Does that intrigue Pyramid Global?

WF: That’s a vertical that we need to spend a little bit more time on. While we have select-service hotels, they are mostly urban. So, we have a decision to make about what we want to be when we grew up as it relates to select-service economy. We’re still trying to formulate that. But when brands like Hilton and Marriott get behind something, it normally works, right… We have a big relationship with both those organizations, and we would try those brands.

HIT: What’s your outlook on opportunities outside of North America?

WF: We’re heavy in the U.K., Ireland, and around the EU, and we’re going to continue to grow that platform. Frank Croston (CEO of Hamilton, Pyramid Europe) has fantastic relationships and good access to capital. We’re really happy to have a platform over there that we can grow very similar to what we’re doing in the U.S. We want to be opportunistic and be sure we can find hotels where the operating teams can perform… I think the opportunity is really big over there when you think about institutional capital, there aren’t a lot of institutional management companies.

HIT: Do you consider Pyramid Global aggressive right now?

WF: You may have to dig a little harder to find the opportunities right now, but there are opportunities out there. We have we have good access to capital, and we have partners who want to put dollars out. We want to be judicious about finding the opportunities that are specific to each of those capital partners, but where there’s an opportunity where we think we can win, we’re going to go after it.

HIT: What’s your broader message to the hotel industry?

WF: The hotel industry has finally reached the point where over the past decade it’s become a legitimate real estate food group. We can drive yield. Those who once were anti-hotels are probably spending time looking at it. And those who have been in and out of the business look at it.

So, feel pretty good about the mouse trap that we’ve created from a management perspective. And if that $13 billion of hotel debt comes due this year, there’s going to be opportunity.