Long seen as the operator for primarily the Ashford Inc. group of companies, Remington Hotels is now seeking to expand with more third-party deals, an infusion of cash and new leadership.
DALLAS—Ashford and Remington have been largely synonymous in the hotel industry for some time, so news that Ashford Inc. was officially purchasing the hotel management business of Remington Hotels in November wasn’t surprising, as it didn’t necessarily mark a sea change for either company.
But newly promoted Remington President and CEO Sloan Dean III said the deal actually will have the potentially surprising effect of making his company more independent from Ashford and, as a result, more interested in growing its portfolio of third-party management deals.
“For us, creating some separation of church and state is important, because we want to do business with large capital groups that we haven’t done business with historically,” Dean said. “That’s something that is necessary given the future of Remington is going to be heavy on third-party management.”
Remington was founded in 1968 by Archie Bennett Jr. His son and Ashford chairman Monty Bennett joined the company in 1992 and served as CEO while simultaneously overseeing Ashford Inc. and its related hotel real estate investment trusts.
Before the 1990s, the company had an owner/operator model. Then the management and ownership sides of the business split between Remington and the newly created Ashford Hospitality Trust, with Remington serving as the operator of choice for both Ashford Trust and its spinoff REIT, Braemar Hotels & Resorts (formerly Ashford Hospitality Prime).
Dean said the strength of Remington’s management—in terms of revenue generation, cost containment and developing a workforce—was a competitive advantage for Ashford’s portfolio.
“We don’t even really need to sell (to prospective owners),” he said. “Just show them our (revenue per available room) index performance or our (gross operating profit) relative to peers or our Glassdoor ratings, which are the highest for any third-party management company and are ranked as high as Hiltons. When we show them those stats, they say ‘Wow, we had no idea.’”
The companies were rejoined, in a way, with Ashford Inc.’s acquisition of Remington Holdings on 6 November. Ashford Inc. is the external manager of both Ashford Trust and Braemar.
After serving in a revenue optimization role at Ashford Trust, Dean moved over to Remington in 2018 as COO and later was named president and CEO, which was publicly announced on 2 December.
Despite all that connective tissue and decades of history, Dean believes the deal will spur on a new era for Remington, fueled by an infusion of cash and growth desires that extend past just managing for its related companies. The infusion of new capital, which Dean attributed to access to new financial levers as part of the Ashford deal, will allow the company to co-invest with owners or offer key money, both things it historically hasn’t done.
Dean said the time is right to grow in the third-party management space for several reasons, including the combination of Aimbridge Hospitality and Interstate Hotels & Resorts, which he said points to a shrinking pool of high-quality managers available to ownership groups.
He said the competition is even less in the types of properties Remington will focus on: “Large, full-service branded hotels with a lot of complexity and a heavy group mix of business” and “iconic, independent hotels.”
The company has a significant track record of success with both types of assets and there are only roughly three large-scale managers that can say the same, especially following Hyatt Hotels Corporation’s acquisition of Two Roads Hospitality, he said.
“We see the barriers to entry (for competitors) as much harder in those spaces,” he said.
Another positive aspect of the timing of Remington’s expansion is broad industry projections of muted to no revenue growth industrywide, which Dean said will make having a high-class manager even more valuable to ownership groups.
Remington “managed 60% of Ashford Trust’s (earnings before interest, taxes, depreciation and amortization), and over the last decade, flow-throughs have outperformed competitors by significant margin,” he said. “When you have firms trying to place money and find deals in an environment where EBITDA expansion is muted, if they can replace management and get a 10% lift, that speaks volumes to what we can do. In a tougher environment, it’s more opportunistic for an operator like us than a couple a years ago when everybody was crushing it.”
Following the Ashford deal, Remington has moved into new offices further separated from Ashford executives and no longer shares personnel in the way they had in the past, Dean said. That demonstrates to ownership groups that Remington is more than just Ashford’s hotel operations arm, he said; it’s one of the largest third-party managers in the industry—with a portfolio of 86 hotels.
Remington has revamped its executive leadership by also adding a development team led by newly appointed Chief Investment Officer Jarrad Evans and promoting Stan Kennedy to Dean’s former role as COO. The company plans to add a yet-unfilled chief commercial officer position.
“We want to beef up and have extra capacity (to deliver service to owners),” Dean said. “None of our competitors do that. They all want to win contracts, then figure it out. We’re taking the opposite approach. It’s powerful to say to a potential owner that we’re adding bandwidth when we already have more than our competitors.”
He said those changes underline the company’s commitment to broad growth.
“I better be successful in growing our third-party platform, because that’s a lot of payroll I’m adding,” he said.
A deal to mark a new era
The deal that perhaps most signifies the start of Remington’s new era is a newly inked management contract with former FelCor Lodging Trust founder Thomas Corcoran Jr.’s TCOR Hotel Partners to retain the management of the 102-room SpringHill Suites Jacksonville, which was sold by Ashford Hospitality Trust for $11.2 million.
While Remington was already the manager of that property, Corcoran said he was inclined to take the management in a new direction until he got a convincing pitch from the Remington team on their management expertise.
“I found (Dean) to be a breath of fresh air, and I was very impressed with the presentation they put together, so we decided to negotiate the management contract with them based upon what we felt would be the right thing for the hotel and our investors,” he said.
He said he was particularly impressed with the revenue management and distribution expertise at Remington.
“They have some really unique systems,” he said. “I’ve been impressed with the depth of what they have with back-of-house operations and analytical tools.”
Corcoran noted the Remington team likely has a “little bit of a learning curve” as they take their business into a broader ecosystem of ownership group. As a former REIT executive himself, he noted it could be awhile before other REITs are willing to work with Remington rather than view them as part of the competition.
“They’re going to need a lot of time under their belt before that’d happen, and it probably won’t be in the next three or four years,” he said.
Both Corcoran and Dean acknowledged REITs are far from the only ownership groups Remington can work with.
“With foreign funds, family office and private equity groups (like TCOR), they can see our affiliation as a benefit,” Dean said. “The only ownership category where the Ashford affiliation frequently comes up is with other REITS, and from an optics perspective, that’s no surprise.”
At the same time, he doesn’t believe that will always be a problem.
“Once we get to maybe 25% to 30% of our portfolio as nonafilliated to Ashford, with Remington as an investor in a few of those properties, I think you hit a tipping point somewhere in there. It may take a couple of years, though.”
In the shorter term, Dean said he looks to continue to strike deals with private equity firms, not unlike the deal with TCOR. He expects roughly three deals before the end of the year and several more in 2020.
“We can go over 100 hotels (in the portfolio) in 2020,” he said. “We don’t have set amounts we want to reach, but in the back of my mind, I think we can reach 100.”
Part of making that happen will be finding key partners, like TCOR, and proving out their strong track record to earn more deals and expand those relationships.
“We’d like to diversify with a few key partners,” he said. “Rather than doing 15 deals with 15 firms, it’d be better to work with five firms and do three or four deals each.”