Hotels Magazine "Survival of the Biggest"
Aimbridge cofounder Dave Johnson is counting on scale to power his firm past the pandemic.
Contributed by MEGAN ROWE
After 18 years as chief executive officer of the reins to Mike Deitemeyer at the end of 2020, taking on a new role as chairman. Deitemeyer was president and CEO of Interstate Hotels and Resorts before its 2019 merger with Aimbridge, and Johnson saw in him someone well equipped to step up, freeing Johnson to concentrate on building the business.
“With [Deitemeyer] in that position, I can focus 100% of my time playing offense,” Johnson says. Offense in this case means transformational growth, something the company plans to achieve by cultivating capital markets, mergers and acquisitions, and new vertical niches.
Johnson, who cofounded Aimbridge 18 years ago, clearly understands how to get the job done. Under his leadership, Aimbridge’s portfolio expanded from eight properties to more than 1,500 hotels owned and managed across 49 states and 21 countries.
COVID-19 fallout will likely boost his efforts. The impact has already been felt; in the past year alone — in spite of or perhaps because of the pandemic — Aimbridge has picked up nearly 200 new management contracts. And Johnson says Aimbridge is close to announcing two deals in Mexico and Canada that together will bring about 70 additional assets into the fold.
Hotel mergers and acquisitions will continue, he says, but Aimbridge is also eyeing new vertical markets, including multifamily and senior living operations, where it can leverage its technology and operations expertise.
TOO BIG TO FAIL
Johnson is a firm believer that size matters. “I made a big bet on scale five years ago,” he says, backing that up with a series of mergers and acqui-sitions that created the largest third-party man-agement company. He estimates Aimbridge is now seven times larger than its next-largest competi-tor. That heft supports investments in personnel and technology and brings bargaining power to negotiate better deals on items like insurance.
Scale has also bolstered Aimbridge’s ability to help owners navigate the pandemic crisis. The corporate team has remained largely intact over the last year, continuing to provide centralized services nd assisting owners in PPE loan applications and lender forbearance negotiations.
Because of its scale, Aimbridge has been able to support owners where other management compa-nies have fallen short over the past year. Johnson says the company has been approached by major brands looking for Aimbridge to step in for owners who are unhappy with the services their current managers are providing. He has also heard directly from disgruntled owners working with downsized management companies who question the value of the contracts they signed.
Johnson and others expect the third-party management landscape to look different when the dust settles. “Unfortunately, a lot of companies in our space don’t have the balance sheet to make it,” he says. He thinks owner/operator developers typically have a strong financial position and good relationships with investors and lenders, but sus-pects that small, pure play management companies will struggle to survive.
Not surprisingly, Johnson expects consolidation among management and hospitality companies to continue. “It will be difficult for smaller competi-tors to make money and operate as efficiently as big companies,” he predicts.
Aimbridge will be on the lookout for acquisition targets, either distressed portfolios or strategic as-sets. The pending deal in Mexico, for instance, is a strategic play because it will introduce the compa-ny to Latin and South America. Most recently, the company took on management of 31 Jupiter Hotels in the U.K. Potential deals in the Middle East and Asia Pacific are also in the works.
PPE loans and forbearance helped many owners survive 2020, but those options are less available, which is likely to increase the opportunities for Aimbridge to grow on several fronts. As Johnson points out, “a lot of money has been raised to de-ploy into distressed real estate,” and investors will look for help turning them around. Another potential area for expansion is providing lenders and special servicers solutions for troubled assets.
“Almost half the CMBS loans are in some type of default,” Johnson says. “Something has to give.” Aimbridge established a receiver services platform to provide legal, operations, financial reporting and franchise negotiations. A team works with lenders, servicers and owners on foreclosure, bankruptcy, workouts and receivership strategies. Aimbridge already has contracts with lenders for more than 20 distressed hotels.
MAKING TOUGH CHOICES
Aimbridge is big, but it hasn’t escaped side effects from the pandemic. More than 40,000 of the company’s 62,000 employees were laid off last year, a decision Johnson calls one of the hardest of his career. The corporate management team also took a 20% pay cut for the last half of 2020.
“The good news is we are starting to bring people back,” he says. By February, Aimbridge had rehired about 7,000 team members.
Johnson says throughout the pandemic, he has tried to be the best leader he can be, and that means commuting to the office every day — a show of solidarity with the team members on the front lines at hotels. And he’s proud of the US$1 million fund Aimbridge established to help assist fur-loughed employees, something he says has created tremendous goodwill.
Like many, Johnson remembers how 9/11 and the Great Recession hurt hotels, but both pale next to the pandemic’s toll. Normally an optimist, he says devastation from COVID-19 has been discouraging.
“In Texas, we’re open, and I can go out to dinner every night. But then I look at some places I travel to, and they are really shut down,” he says. He also worries about the legions of travel and hospitality workers who are out of work.
But the arrival of vaccines has given him some hope. “Every state continues to get better, NFL owners are talking about having more people in stadiums in the fall, airport traffic is up,” he notes. “There’s definitely light at the end of the tunnel.”