U.K.-based Bespoke Hotels has joined with U.S.-based Broughton Hotels to form Bespoke USA, creating the opportunity for both companies to grow in the U.S.
GLOBAL REPORT—British management firm Bespoke Hotels has signed a partnership with American developer Broughton Hotels to open and manage hotels in the U.S. that fall into Bespoke’s boutique, golf and branded urban sweet spots.
Derek Baird, owner of investment and real estate consultancy Pacific Property Group, will lead the new joint venture as VP of Bespoke USA.
For executives at Warrington, England-based Bespoke, the partnership is based around bringing together two sets of different but complimentary knowledge and expertise.
Baird said one focus was on the two firms’ management, looking at full-service opportunities in segment areas where Bespoke has experience and where Broughton Hotels does not have a geographical presence in.
Broughton Hotels will be responsible for targeting opportunities and managing Bespoke USA assets in the U.S., while Bespoke Hotels brings to the deal its distribution capabilities and international experience, according to Sam Sheppard, Bespoke Hotels’ communications officer.
“Our focus is to bring together the best of American and British management efficiencies,” Baird said. “We’re looking at boutiques, independents and serviced apartments, with a few twists on that mode.”
Baird said the new vehicle will bring an independent spin to the North American market.
“We’re also looking at a few assets past their prime that would benefit from fresh management and (food and beverage),” Baird said, who added the joint venture already is working on a couple of deals “progressing very nicely in California at the moment.”
How it started
Bespoke Hotels came up with the idea for the partnership and proposed it to Broughton Hotels’ Founder and CEO Larry Broughton, Baird said.
“I approached (Larry) myself,” he said. “You cannot enter this type of market on your own. I had a short list, but it became shorter very fast. Larry’s name jumped out.”
The two companies worked together through video calls and in-person meetings over 10 months, Broughton said, and they discovered early on they were “kindred spirits.”
“We thought it would be a runway to grow our portfolio here in North America and have a great partner along the way,” he said.
Broughton Hotels has made deals for hotels in Mexico and has worked with clients, Broughton said, but it’s not developed an international partnership like this before. The company has had people approach it wanting to invest or create deals, he said, and typically the company is skeptical to such proposals.
After working through the process with Bespoke Hotels and doing its due diligence, the companies decided to do a few deals together before fully committing to each other, Broughton said.
“It’s an easy way to test the water with each other and learn how each organization works,” he said. “You can date and flirt all you want, but until you do deals together, you don’t get into the intricacies of people’s business.”
The two companies are looking at potential deals in Chicago and California, Broughton said, as they have been actively looking at projects for a couple of months. Broughton Hotels already has four properties in Chicago, but its main concentration is in California. The joint venture is also looking at Austin, Texas, the Pacific Northwest region, a few Midwestern cities as well as Washington, D.C., Boston and Atlanta.
“This will be a nationwide push,” he said.
Broughton Hotels likes to take a hub-and-spoke approach in which it starts with one hotel in a market and then picks up a few in the area after a while to benefit from economies of scale, marketing branding and sales, Broughton said.
“We have four deals we’re actively chasing right now,” he said. “We would hope by the end of summer to have at least one of them tied up.”
Initially the goal is to have three or four deals set by the end of the year, he said, and picking up eight to 10 a year after. He said this is a reasonable pace.
One thing that helped the two companies come together is they both have similar views of the markets they consider as well as the styles of properties, Broughton said. Bespoke Hotels is about truly independent, boutique operators, he said, and Broughton Hotels loves finding adaptive-reuse properties or hotels that are long in the tooth and need renovated.
“I’m not a big fan of paying for someone else’s improvements,” he said.
In some cases, boutique and independent hotels have lost a little of their magic, Baird said.
“My job is to let the hotel be the star and add value in the asset and its real estate,” he said. “I am a great believer that a good hotel is a busy one, and F&B will be a big part of it as well.”
Baird said hotels under the Bespoke USA umbrella, as is the case with those under Bespoke Hotels, do not have rigid brand standards, but rather the right ones.
“Larry drives for a high level of standards. We both are intent on reinventing boutique hotels,” Baird said.
The right experience
Bespoke Hotels, founded in 2000 by CEO Haydn Fentum and Chairman Robin Sheppard, has approximately 80 properties, 9,500 rooms, 8,000 employees and £815 million ($1.07 billion) of assets under management in 22 countries, including the U.K., France, Australia and Thailand, as well as six properties in the U.S., which are all in Florida.
“We directly manage 60 or so of the portfolio and have marketing relationships with the remainder,” Sam Sheppard said. “Most are leased and managed. It is a global portfolio, and it is bespoke both in name and membership.”
Baird also pointed to the benefits deriving from Bespoke Hotels’ experience, which he said at board level added up to approximately 280 years.
“It is a significant track record,” Baird said, who added its innovation spanned many niches, segments and geographies.
“That diversity is across a different range of standards and locations, while Broughton (Hotels) is quite coastal in its geography,” he said. “(Bespoke Hotels) has relationships across all of Europe, in Spain, in Southern Italy, Denmark, for instance, across all climates and customer bases. We pride ourselves on being comfortable across classifications. These principles can carry over to any situation.”
Broughton Hotels has 10 hotels under management in Chicago and California, as well as four affiliated hotels in the U.S. and two in the pipeline.
The company approaches its business as a strength-based organization, Broughton said, focusing on how to get its team members involved. It’s too common guests will enter a beautiful hotel but the staff is checked out and won’t engage with the guests, he said.
“We realized if we can make the team members engaged, they’re having great experience, then the guests will have great experience,” he said.
Hotel owners and managers too often put investors first, Broughton said. When the market starts to turn, the first move is to cut expenses rather than enhance the team and guest experience.
By enhancing those, the guests are willing to pay a premium even in a down market, he said, which in turn makes the investors happy.