Remington Hotels has established itself as one of the leading hotel management companies today with more than 120 properties under operation and development that span everything from upscale branded hotels to luxury independent hotels such as Bardessono. I recently spoke with Jarrad Evans, Chief Investment Officer for the company, about the role of third-party management companies today, differentiating as an operator, and how he is thinking about growth.
Jarrad’s career in hospitality
Jarrad’s career in hospitality began at a third-party golf management company called Troon Golf, based in Scottsdale. “The company was a partner of Starwood Hotels, and for all intents and purposes was the golf division of Starwood.” This role provided exposure to what upper upscale luxury hospitality looked like, he told me. From there, he moved to ClubCorp, an owner and operator of private golf clubs and country clubs, before taking the role of SVP of Business Development & Strategy at Benchmark, a hotel management firm.
At Benchmark, Jarrad had the opportunity to work with independent hotels and resorts, a segment of hotels he fell in love with. These experiences and passion for building hospitality companies led to his present role as Chief Investment Officer at Remington, a role he’s held since 2019.
Remington’s foray into third-party hotel management
After decades of managing hotels they owned, Remington Hotels decided to begin providing third-party management services for other owners.
“Our focus is growing through the management of upper-upscale and luxury full-service hotels, whether branded or independent properties.”
Defining the type of owner they wanted to work with was important at the start. “We decided to focus on partnering with institutional grade capital partners,” Jarrad said. “That doesn’t mean they have to be actual institutions, but we want to work with partners such as private equity firms, real estate investment groups, insurance companies, high net worth individuals, or family offices that really know hospitality.”
In their experience, knowledge of hospitality is essential for a productive owner-operator working relationship.
Part of Remington’s strategy was also selectively acquiring other hotel management companies (“platforms” in industry speak) that would help the company grow, whether that was geographically or by product type. The way Remington serves independent hotel owners is an example of this.
“Today we operate 18 independent hotels. We saw there were only a handful of operators that manage independent hotels well, and believed we could build the right infrastructure and talent to do this.”
Remington’s acquisition of Chesapeake is an example of this strategy playing out. “They had a great portfolio very similar to ours – 70-80% full-service hotels, with several independent hotels and a few soft-branded lifestyle hotels. Further, the acquisition helped us continue to build our presence in the Midwest and mid-Atlantic.”
When Remington acquires new platforms, its intent is to retain the talented people at those companies.
“Chris Green, who used to be CEO of Chesapeake, is now a divisional president with Remington and a key executive team member. I’ve known Chris for years and he is a good personal friend, so when he and his partners decided to look for options for their future, we talked about what a deal could look like. Eventually, we worked out a deal and were able to keep the vast majority of their staff.”
The importance of retaining talent in acquisitions
Jarrad believes retaining talented people in the companies Remington acquires is a difference maker, because of the macro landscape of management companies today.
“We are in a great position because we are already owned by a publicly traded company, so we are not racing to an IPO or other liquidity event. As a result, I don’t have a specific property count growth goal I have to stretch to achieve at Remington to facilitate such a liquidity event. We simply want to be the best third-party management company in the world. That’s what owners expect from their management companies. [Remington CEO] Sloan and I always say that we never want to get to the point where we are too big that we don’t personally know our owners and their objectives with their properties, or we are so busy growing that they can’t pick up the phone and call us.”
With the Chesapeake acquisition, Remington welcomed new talent that helps them deliver on this goal. “We’ve brought on some incredible talent and up-and-coming leaders who will be an important part of our long-term success.”
What does a third-party hotel operator do?
For those new to the industry, I asked Jarrad about the role of third-party hotel management and where this type of company exists in the hotel ecosystem.
In his view, owners are the most important driver of change in hospitality. “It all starts with owners, and management companies need to be the best possible steward of their hotel assets. We do this by really getting to know our owners and their investment thesis – what they want to get out of their hotel investment. Through this, we discover a wide range of desires on how we should execute the business plan and operate their property.”
Jarrad has seen many times where a change in ownership for a hotel leads to a change in operations – and that change in operators unlocks value.
“We’ve taken over assets that are about to undergo massive renovation and repositioning. We’ve taken over independent hotels and had them flagged with different brands. We’ve overseen the change of brands on a property. We’ve supported design and construction with our team in concert with the owner. At the end of the day, operators are responsible for the hotel property and investment.”
Jarrad finds that Remington’s heritage as an owner-operator founded in the late 1960s means it’s in the company’s DNA to execute operations with an owner’s perspective.
“Not all operators can say that. Many management companies have never owned an asset. They’ve never had to write checks to the bank for debt service and understand what that means for running the hotel.”
The importance of hotel brand relationships for a third-party management company
Remington operates more than 100 branded hotels with Marriott, Hilton, Hyatt, IHG, and Wyndham. “These brand relationships are critical,” he says. “We have multiple executives that sit on owner advisory councils and have influential advisory positions with the brands. We participate heavily in their functional areas such as commercial strategy and operations.”
Hotel brand relationships that management companies like Remington have gives owners of one asset the ability to represent themselves well.
“If you’re the owner of one hotel asset and are dealing with a very large organization, you may not know how to navigate it. We have the credibility, history, and experience with hotel brands to be able to liaise with that brand on behalf of that single property owner. Whether it’s a challenging issue, or perhaps a re-positioning/re-branding project, we can be an advocate on behalf of them.”
Jarrad found this representation especially important in recent years with the hard decisions that had to be made during the pandemic and recovery that followed. “We’re a big advocate on behalf of our owners to make sure there’s business value in brand standards for them.”
Overall, we work on many levels to make the brand value equation as profitable as possible for our owners.
Where and when operational decisions are made for hotels
I was curious to understand which decisions are made between owners, brands, and management companies – and when and how those decisions are made. According to Jarrad, operating processes are typically initiated by hotel brands.
“Brands attempt to define all standard operating procedures, including the technology that you use. They have certain systems and standards in place that an owner has to meet.”
But to some extent, owners can push back on when and how these brand standards are applied. “For example, if there are requirements for new technology systems or programs, we will support owners in trying to get a good game plan together to achieve that ideal end state efficiently.”
The third-party operator is there to advocate on behalf of ownership and ensure that the brand and guest experience is delivered in the most fiscally efficient manner.
When a hotel property is sold, the change of ownership becomes a critical moment for operational decision-making.
“We will work with ownership to decide whether a property improvement plan is relevant, or if they’re just being forced to spend money on things that may not be necessary. We work with them on the timing of items in the improvement plan on what makes the most sense. And then once the renovations are planned, we provide operational input and guidance.”
New build hotel developments are another example of how Remington supports owners.
“We don’t try to direct our development partners aesthetically or architecturally speaking, because they usually have a vision in mind. Instead, we focus on helping them identify operational deficiencies in their plan. We will look at things such as floorplans and make sure they have the right sizing, space, and efficiencies. Ultimately, we want to help them make the end product as operationally efficient as possible for the life of the asset.”
Without this expert perspective, something as simple as a floor plan can end up requiring additional staff and extra costs.
Finally, an area to help owners – especially smaller ones – is with buying power.
“A company like Blackstone has all the scale in the world, so they get a lot of preferential buying power as a large-scale owner. However, when working with Remington, given our size, we can help smaller owners by extending our negotiated discounts with vendors for anything required at a hotel property, which can lead to significant cost savings.”
How hotel management deals are formed
When do hotel owners start looking for a hotel management company, and how does this search process look?
Remington typically works with more sophisticated owners, and so the process is a bit different than working with people doing their first hotel project. From what Jarrad has seen, Remington builds very close relationships with their capital partners, so in addition to him and his team sourcing new opportunities for their existing partners, Remington’s clients also contact them when opportunities present themselves. Additionally, with some new owners, Remington will participate in RFP processes, which narrow the field to two or three operators to see who can create the best business plan.
“Ultimately, what we do is convey what we’re going to do with the asset in tandem with ownership, along with how we are going to support them with the time and attention they require. It’s about creating the most compelling business case possible, and that includes a lot of different elements. It’s not just myself or one of my teammates having a great phone call with an owner, but rather helping them understand the full breadth and support of the organization.”
Forming a hotel management deal is a team sport. “Operations, commercial, accounting, legal, and HR all contribute to us securing a management contract.” But there’s another group that Jarrad said typically never gets enough credit in this process. “Ultimately, our success is driven by our people on the ground who are executing and operating our properties. It’s really helpful for us to be able to showcase where we’ve done something similar. This allows us to tell owners ‘Here’s a business plan we think it’s right for your asset, and here are a few examples or case studies where we’ve done this before and have been successful.’ That’s the best sales tool we can ever have.”
Jarrad mentions this dynamic at every conference the company holds: that it’s the performance of operators on the front lines that drive the success of their management business overall.
The Remington Difference
When asked why owners choose Remington over other hotel management companies, Jarrad shared a few reasons.
Jarrad believes the ratio of support staff to hotels that Remington has provides them with an advantage. “We have more than 270 home office team members covering 120 hotels. Specifically, our regional operations and commercial teams have among the lowest ratio of properties to staff in the industry.”
Remington aims to have only 10 hotels overseen by each Regional Director of Operations, while the industry average is closer to 15-25. “If you think what that means in terms of the time and attention and the value we can provide each property, you can see where it makes a difference.”
Remington‘s focus on delivering financial results is also a priority. “We’ve always been a very commercially-driven organization and very aggressive in driving topline revenue. That said, while we are very top-line driven, having been an owner-operator in the past, we have an extreme dedication and focus on cost control. We have operating models that not only allow us to manage labor effectively, but we also leverage proprietary technology systems and tools that give us an advantage.”
“Pre-pandemic CBRE reported we operated at 400 basis points stronger in GOP (Gross Operating Profit) than other third-party operators. Benchmarking this in today’s market is a little harder, but we’re winning on top-line performance and we’re winning at the GOP level, flowing all of that cash back to our owners.”
Technology plays a key role in how Remington delivers this performance.
“One thing I am very excited about that we’ve been working on for several years is a proprietary business intelligence tool called REMi. It’s a customized version of Microsoft’s PowerBI, and it provides our owners with 24/7 live access to reporting. We pride ourselves on being a very transparent company, and this tool provides owners full transparency of their property’s performance.”
Owners are looking for innovation through technology, Jarrad observed. “By investing in the development of REMi, we can make better decisions in real-time and be more nimble than our competitors, whether it’s adjusting top-line strategy or labor contracts. I can tell you that platform alone has helped us win multiple management deals.”
Opportunities for growth through performance
Today, Jarrad is excited about the opportunity to demonstrate higher performance to owners and win more management contracts because of that.
“Over the last 30 months or so, there hasn’t been a lot of management turnover that was not been tied to some sort of transaction. A lot of operators had a bit of a hall pass throughout the pandemic, quite frankly. But now we’re starting to see more management changes by owners because as the industry recovers, those who can maximize market share and performance will be rewarded.”
Now that the industry is coming back, operators are going to be held accountable for performance. That makes me very excited.– Jarrad Evans, Remington Hotels