Strength In Numbers
TPG Gains Scale, Ups Commitment To Third-Party Management With Marshall Acquisition
In a deal that instantly creates one of the 10 largest operating companies in the lodging industry, TPG Hotels, Resorts & Marinas recently announced the acquisition of Marshall Hotels & Resorts with designs on taking its third-party management to the next level.
The combined entity—which will now be headquartered in Salisbury, MD, where Marshall has maintained operations since being founded in 1980—will boast a portfolio of some 130 hotels within the U.S.
The merger was announced last week during the ALIS Conference in Los Angeles. Mike Marshall—who will serve as President and CEO of the combined companies—told Hotel Interactive that initial discussions between the companies began as far back as a couple of years ago, but intensified at The Lodging Conference this past fall.
Rob Leven, chief investment officer, The Procaccianti Companies—a Cranston, RI-based real estate investment firm which also oversees a number of operating companies, including TPG Hotels, Resorts and Marinas—asserted the deal is a game changer for both companies.
“For us we’ve been dabbling in third-party management for a number of years and it’s very difficult to dabble with a one-off here and a one-off there. Marshall is 100 percent third-party management so the combination of the companies really turns the new entity into something different for both parties, frankly. It becomes a concentrated third-party management business and it just puts us in a position to really be in the business,” he said.
For his part, Marshall called the deal a “natural progression” for his company and he emphasized the importance of both companies being family run businesses. Marshall also touted the potential of the company.
“I felt like we were getting a little stale as a company and we needed to make a change. I think that we can create a model management company that is going to be better than anything that’s already been out there. We looked at some of our competition, how much bigger some of them are than us and how we can give much more personalized service,” he said.
Marshall, who added of TPG “they have a lot of financial bandwidth behind them,” further detailed what the newly formed company’s approach to growth will be as well as some of the other potential benefits of the partnership, particularly on the labor side.
“We’re going to be very selective in what hotels we choose to run and who we partner with from a management standpoint. The deal is also going to allow us to attract some of the best and brightest minds as well, who maybe don’t want to work for some of the bigger companies. There’s a select talent pool that we’d like to draw from and we think by being a size that’s nimble and talented we can do something that’s special,” he commented.
Leven also detailed some of the benefits of being larger, identifying both labor and more efficient and comprehensive technology systems as potential areas of improvement.
“It’s becoming clear that scale is critical in the third-party business. We recognize that and I think a lot of people are recognizing that. It’s not size just because you need to be big, but the resources that you can bring to bear. Ultimately, we can bring that benefit to our owners in terms of profitability and execution at the property level,” he said.
Meanwhile, Leven emphasized that “nothing is really going to change significantly” in terms of the company’s existing corporate personnel and that TPG will remain focused on the investment side of the business, as well as asset management.
Tim Muir, chief development officer, TPG, pointed out that the companies were a particularly good fit and insisted the new structure—as well as the addition of some 75 third-party managed hotels from Marshall’s portfolio—will help change how TPG is seen within the industry.
“We’re a family business and the DNA with Marshall and our company is aligned. I think this will take our perception to be more of a management company and a developer,” he said.
Leven reinforced the point. “People have always seen us as owners and operators. That’s been the core of our company over the years, but I think this shifts the reality and perception of the company,” he said, further adding TPG will effectively be the biggest customer of the new management company with some 60-plus properties.
Finally, Marshall expects to have increased access to capital in the wake of the deal and ultimately a larger pool of development partners when it comes to different types of projects, such as new builds or joint ventures, as an example.
“They will see that there’s a larger presence on the management side, instead of just the financial side. It’s a different kind of management company and it becomes more attractive to developers that are looking for partners that they can trust,” he said.
