Skift Take
Given a string of bad luck events, it can seem like Ace Hotels is a jinxed brand. But any visit to its properties in New York, New Orleans, or LA will reveal an electric vibe that's a reminder it can be salvaged and taken to the next level.
At the start of the year, Sortis Holdings said it would acquire Ace Group International, owner of Ace Hotels, for $85 million in cash. Now the deal is off.
The two sides had sued each other, with Ace executives claiming Sortis didn’t have the cash to complete the all-cash deal. Sortis alleged that Ace had, in bad faith, signed a partnership that went against the terms of the deal.
In August, the two sides reached terms to settle out of court, keeping the merger on track. But then fresh problems emerged.
“After the settlement agreement, the [Ace] business experienced material changes, including the loss of multiple hotel management contracts totaling over 20% of the portfolio, as well as the departure of a key employee,” the company said in a statement to The Portland Business Journal. “These changes, coupled with the continued rise in interest rates since the execution of the original agreement, factored into our decision-making.”
Skift has reached out to both sides for comment.
UPDATE on Nov. 7: A comment from one side:
“Ace has always been, and still is, a well-capitalized, independent company with a unique place in the market,” said Brad Wilson, Partner and C.E.O., Ace Hotel / Atelier Ace. “We pursued the Sortis opportunity as an off-market arrangement with friends having common interests and goals for the Ace brand. We had hoped the Sortis platform, as described to us, would offer a pathway to accelerate growth with synergies that, in the end, were nonexistent.”
“Since that time, we have moved on with positive results and are confident with our team and prospects,” Wilson said. “Ace has three soon-to-be-announced properties under construction, and we are signing new deals at a consistent rate.”
Ace Hotel’s Impact
Buzzy lifestyle brands are the hottest segment of the market, and there are just not many independent ones left after a recent acquisition streak. That includes Highgate’s purchase of Viceroy in late 2022 and Hyatt’s late 2022 acquisition of Dream Hotels Group.
Ace had an outsized impact on the lifestyle hotel concept despite its small size. It was ahead of the curve on turning lobbies into informal co-working spaces. And it was a case study on creating music-and-arts-themed venues with strong ties to local vendors.
But the brand has had rough patches. In 2013, a co-founder, Alex Calderwood, died.
Then, in 2019, Ace took a financial risk by launching the Maison de la Luz luxury property in New Orleans. Then the pandemic hit. Many of its locations were in urban areas hurt by the pandemic — strangling cash flow for a company with less access to cheap credit than large hotel groups and investment firms.
Ace Hotels had 10 open properties listed on its website on Friday, one fewer than in January.
Article was updated with a comment from Ace’s CEO.
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Tags: ace hotel, Ace Hotels, future of lodging, hotel development, lifestyle brands, lifestyle hotels, mergers and acquisitions
Photo credit: Meeting space at an Ace Hotel in New York City. Source: Ace Group International.