AHIP sees benefits of scale through Aimbridge deal
 
AHIP sees benefits of scale through Aimbridge deal
04 APRIL 2018 8:08 AM

The executives at real estate investment trust American Hotel Income Properties said Aimbridge Hospitality taking over management of their 115 hotels will give the company better purchasing power.

VANCOUVER, British Columbia—With Aimbridge Hospitality poised to take over management responsibilities for all of American Hotel Income Properties’ 115 hotels, executives at the real estate investment trust are looking forward to the advantages that will open up through the management company’s sheer size.

AHIP announced 2 April that Aimbridge had entered into a binding agreement with One Lodging Management to assume operations of AHIP’s properties by the end of the month.

President Ian McAuley said AHIP is a publicly traded REIT on the Toronto Stock Exchange, and the REIT’s founders also created One Lodging Management, a third-party management company. For years, One Lodging Management had operated all of AHIP’s properties. Now Aimbridge has an exclusive management agreement with AHIP for the next five years.

AHIP also had an exclusive development agreement with SunOne Developments, a subsidiary of One Lodging Management. Once Aimbridge takes over management of all of AHIP’s properties, AHIP will be free to work with other developers.

Executives at Aimbridge declined to comment on the deal.

Power of scale
The timing was right in terms of the size of AHIP’s growing portfolio, McAuley said.

“We’ve doubled the last two years and more than doubled revenue,” he said. “Our footprint has grown from a small 33-hotel portfolio to 115 hotels. (One Lodging executives) felt it was time to hand the reins over to someone with a larger footprint.”

That larger footprint is exactly what AHIP needed, McAuley said. Being part of Aimbridge’s network now gives the REIT more purchasing power.

“We’re expecting they can deliver higher levels of purchasing power, whether it’s waste management or chemicals for laundry or contract labor,” he said. “That’s a big issue for contract labor. It may be better pricing for us on all of that.”

The timing of Aimbridge taking over management responsibility for AHIP’s hotels is perfect, McAuley said. Labor costs and property taxes squeeze margins, and having Aimbridge as a partner will help AHIP improve its margins and take advantage of the growing economy.

The scale provided through Aimbridge will also help employees’ career development, he said. Previously, if the GM of an 80-room Hampton Inn by Hilton wanted to move to manage a larger hotel, there might not have been many opportunities to do so under One Lodging Management, which means risking losing that GM. Being part of Aimbridge’s system means the company can help that GM grow and can hire another good GM or promote internally to fill that spot, he said.

Employees who receive better treatment and opportunities in turn treat guests better, McAuley said.

“We’re the owners of the real estate,” he said. “Our mandate is we drive as much income for that for our unit holders, but we also understand the hospitality side of it.”

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