OPERATIONS
retain management , such that they are run in a manner that doesn ’ t wander from the brand standards and principles . More and more , however , the brands have moved away from that game , leaving a vacuum to be filled by a surfeit of management companies waiting in the wings .
Though the U . S . franchise model is mature in the U . S ., it ’ s emerging in Europe , at around a 40 % clip , Anderson said . What ’ s more inviting for management companies is the idea of owners flipping from a managed scenario with the brand to a franchise , “ which creates an incredible opportunity for us ,” he said . “ An owner who says , ‘ I don ’ t want the brand to manage , but I do want the flag .’” Anderson believes Aimbridge ’ s breadth of work and partnership with the brands makes them a compelling choice for owners since they already manage so many of the brands ’ hotels .
He added that as owners — from private equity to highnet-worth individuals — have become less passive with their investments and closer to the hotels they own , the more a management company ’ s expertise matters . “ They have become hotel experts ,” Anderson said .
He also acknowledges some of the frustration owners have had with brands in the past , primarily vexation on things like pass-through costs . In addition , owners , today , want more plasticity in the their hotel management agreements . Anderson said Aimbridge ’ s brand relationships and owner alignment allow them to maximize an asset ’ s cash flow and ROI at exit . “ We align with the owner in their strategy ,” he said . “ So , if they say , ‘ Look , we ’ re looking to buy this value-add portfolio , we ’ re going to renovate and we ’ re probably going to hold it for five years . We need someone who is going to project manage and give us flexibility with the HMA so down the line we can maximize the value of that asset and be able to , if required , sell unencumbered of operator .’ We align with that ; it ’ s very appealing now to a lot of owners .”
EASTBOUND Western Europe isn ’ t the only region Aimbridge is looking to expand within . Prior to the Russia invasion of Ukraine , Aimbridge managed nine hotels in Moscow and exited in July 2022 in light of U . S . sanctions . Aimbridge took its corporate team and created an office in Tbilisi , Georgia , where in June 2023 it signed a management agreement with Alliance Group , one of the largest developers in Georgia , on the Alliance Palace Aparthotel in Batumi , Georgia ’ s second-largest city and on the shores of the Black Sea .
The farther Aimbridge moves east , the less the traditional hotel management agreement is employed or understood . Anderson said that is changing . In Armenia , Aimbridge manages The Alexander , a Luxury Collection Hotel , in the country ’ s capital of Yerevan . It also manages a Residence Inn in Sarajevo . The Middle East could become another region of interest . “ There are no real operators of scale in the Middle East ,” Anderson said . “ We are always assessing the Middle East based on what the brands tell us , that when they come to renew their HMA , some of them will say , ‘ You know what , I would love to keep your flag , but manage independently of you .’ That ’ s something that is happening in the hotel space in the Middle East , where the idea of a third-party operator is desirable .”
Still , third-party operations can even take exotic form outside the U . S ., specifically . Consider the structure of a recent Aimbridge deal in Leeds , U . K ., on the dual-brand Hyatt Sovereign Square , which recently concluded its
IF THERE ’ S ALL THOSE TRANSACTIONS [ IN EUROPE ], WE NEED TO BE THERE ... YOU ’ VE GOT TO BE PRESENT
– DAVID ANDERSON , DIVISIONAL PRESIDENT , AIMBRIDGE EMEA topping-off phase and is slated to open next year . The 12-story hotel is a joint venture formed by UK-based property asset management Marrico and real estate developer Helios for the UK Commercial Property REIT ( UKCM ) and Hyatt Hotels . Aimbridge will manage the property , but in a twist , it entered into a 25-year franchise agreement with Hyatt Hotels .
Anderson said it works similar to a straightforward management agreement , with some distinctions . Including negotiating a termination clause with the brand , the structure works by Aimbridge paying itself a base fee and incentive fee , but then would pull funds out of the property for items like FF & E and other expenses . “ Whatever was left then goes back to the fund ,” Anderson said , adding that owners see the upside in this because it allows them less exposure .
“ It ’ s something that has created a lot of interest in the U . K . and for other REITs who have never delved into the hotel business ,” he said ..
58 hotelsmag . com Jan / Feb 2024