Yesterday, it was announced that Aimbridge Hospitality and Interstate Hotels & Resorts intend to merge. Once finalized, the combined companies would represent more than 1,400 properties in 49 states and 20 countries. The deal isn’t expected to close until later this year, but LODGING reached out to Aimbridge co-founder and CEO Dave Johnson and Interstate president and CEO Mike Deitemeyer to talk about the deal, how it will affect the companies, and what their owners can expect from steep increase in scale.
How did this deal start and what are next steps?
Dave Johnson (DJ): We started having some high-level dialog about a potential merger between the companies about six months ago. Then, things really heated up about 90 days ago. Mike and I met and talk and the more we discussed things and dug deeper into what the merger would entail, we just felt like the companies coming together would provide tremendous benefits for our owners and tremendous benefits for our employees. The synergies we’d have, along with the capabilities that come with that scale, mainly in the areas of data aggregation, would drive down cost, improve margins, and create better opportunities for career advancement. Combined, we’ll be able to offer opportunities all over the world.
Also, Mike and I have a 20-year history, going way back to his Omni days. We’ve been great colleagues professionally, but we also became very good friends personally. I have the utmost respect for him. He’s a fantastic leader and what he’s done at Interstate in three years has been phenomenal. His initiatives have led to amazing results. It was critical to me that Mike would stay on board so that we could work together in managing a world-class entity.
Mike Deitemeyer (MD): It’s very exciting, and Dave and I used to talk about how it would be great to work together someday. Now we will be! Going forward, both Dave and I are going to make sure we continue to focus on operational excellence and building our business out the right way. Bringing both of these organizations together just makes sense, and we think there’s an opportunity to create some really unique opportunities.
What sorts of opportunities?
MD: When we think about the hospitality business, scale drives so much value. So, for one, with the scale of the combined companies, we should be able to bring our owners efficiencies that they haven’t seen third party managers deliver in the past. Procurement, benefits, technology, insurance, all of those costs may be reduced.
There’s also the business analytics opportunity that comes with this type of scale. Being in this industry, you win on the edges a lot of the time. It’s how you fill those shoulder periods, how you think about business losses and demand, that can drive results. And we have all this great data about what’s going on with specific markets, room trends, lead trends—there’s an incredible opportunity to really put that data to work for our hotel owners.
All that said, though, the biggest opportunity I see will be for our people. It’s all about our talent pool. We are creating a company effectively has every franchised brand covered, that has properties all up and down the chain scale. There’s a diversity of experiences, which really appeals to the top talent that’s coming out of hotel school with a passion for hospitality. That’s pretty exciting and pretty compelling.
DJ: I also think people will seek us out more than they already do today because they will want to work with us. The best talent in the industry wants to work for growing, vibrant companies. And the bottom line is that if you have the best talent, you win the war at the asset level.
What do you see the integration process being like?
DJ: I want the integration of the two companies to be very collaborative. We want to take the best of what they’re doing and the best of what we’re doing and learn from each other to create an even more powerful organization. Our number one priority on both sides—and even more when combined—is how to create better value for our owners. If we do that, if we deliver to our owners, it makes growth easy.
How are you going to keep the lines of communication open with your owners and employees over the next few months before the deal closes?
DJ: We took the initiative prior to our official announcement to reach out to both sides. We wanted to make sure that our key owners—some of which we both operate for—heard about the merger directly from Mike, myself, or one of our senior leaders. The message we wanted to send to them is really two-fold. First, when it comes to the folks who touch their assets on a daily basis—the VP of operations, the VP of sales, the director of revenue management—there will be no change what so ever. Second, we said that when we begin the integration, post-closing, none of those individuals will have anything to do with the integration. We’ll have an independent integration team so we have zero disruption at the asset level.
MD: Yesterday, I stood in our D.C. office and talked to the corporate team. I committed to being very active and ensuring that I make time to dialog with them. We’re aiming to give bi-weekly, if not weekly, updates. We want quick and constant communication on how things are evolving.
How are you employees responding?
DJ: Overall, it’s been really well-received. We’ve already gotten a lot of suggestions and ideas regarding how we might want to leverage the additional scale to improve value creation for them. They absolutely see the combined organization creating more opportunity for them from a career advancement standpoint.
What does the immediate future look like for the companies, leading up to the merger?
MD: Interstate has a very robust pipeline. We’ve got a lot of hotels queued up that will bring us, independently of Aimbridge, to a record number of hotels and record revenue next year. Aimbridge is in the same position. We’re two growing organizations and when we come together, the scale that was announced today will be exponential as we move forward.
I also want to note that we are a people and process business. We don’t own the bricks and mortar, and we don’t own the brands; it’s people and process. So, I think the growth that, one is already on the books, and two, is the catalyst for this transaction, will continue to fuel the opportunities for our associates.