The bigger-is-better mantra of hotel management companies is a driving force behind the Benchmark-Pyramid merger. But this still doesn’t come into the same league as mega-manager Aimbridge Hospitality.
Pyramid Hotel Group and Benchmark Global Hospitality, two of the largest U.S. hotel management companies, are joining forces.
The two companies plan to merge and take on the new name of Benchmark Pyramid. The combined company would have 210 hotels and more than $3 billion in annual operating revenue, according to an announcement released Thursday with the merger news. No financial details of the deal’s structure were disclosed.
While Benchmark Pyramid stands to get bigger through the merger, the combined entity would still fall well short of the largest U.S. hotel management firm — Aimbridge Hospitality, which oversees roughly 1,500 hotels.
“Entertaining the idea of a merger has always been about finding the right fit in terms of both business strategy and employee culture,” Warren Fields, founding partner and CEO of Pyramid Hotel Group and who is the CEO of the new company, said in a statement. “We recognized early in our discussions there were unique and exceptional advantages in combining the respective strengths of our organizations.”
The combined portfolio encompasses independent and so-called lifestyle hotels as well as branded hotels and resorts. Some of Pyramid’s hotels include the Boston Harbor Hotel and the JetBlue Lodge at the airline’s Orlando training facility. Benchmark’s managed portfolio includes the Turtle Bay Resort in Hawaii and a Margaritaville resort near Houston.
Pyramid was the fifth-largest U.S. hotel management company in 2019, according to the most recent Hotel Business ranking of firms. Benchmark was the 12th largest.
A Benchmark Pyramid representative declined Skift’s request for details regarding how much the merger would cost. But the motivation for a merger is as similar in the hotel management orbit like it is in the branded segment.
“In the management space, you have to get bigger to stay alive,” said LW Hospitality Advisors CEO Daniel Lesser.
The bigger a management company gets, the more purchasing power it has regarding everything from vendors to technology contracts.
The Benchmark Pyramid deal also continues a trend and general industry expectation that much of the hotel sector’s mergers and acquisition activity coming out of the pandemic wouldn’t directly entail the brands themselves. Instead, it would involve lodging trusts as well as the management companies.
Terrapin Hospitality acquired hotel management company K Partners Hospitality this week. On the lodging trust side of the equation, Blackstone plans to acquire Condor Hospitality Trust’s entire 15-hotel portfolio for more than $300 million. The investment group also made its largest sale on a single real estate asset this week with the $5.6 billion Cosmopolitan of Las Vegas resort deal. A Blackstone subsidiary is part of the buyer consortium.
Don’t rule out hotel brands beginning their own acquisition spree, but it isn’t expected to be as robust as what’s happening in the management and owner sector.
“There’s just not a lot left for the brands to buy. All the big companies have gotten bigger,” Michael Bellisario, an equity research senior analyst at Baird, told Skift last week. “Is there a 100-hotel brand company out there a brand is going to scoop up? Maybe, but I think it’s going to be more of a tuck-in deal.”
Tags: benchmark, mergers and acquisitions
Photo credit: The Boston Harbor Hotel (pictured) is part of the combined Benchmark Pyramid portfolio of managed hotels. Beyond My Ken / Wikimedia