quick take
The Highgate name has not been associated with luxury and lifestyle until now. But the company, which is the second-largest hotel manager in the US, is making some distinctive moves that are likely to expand its presence among high-end full-service properties.
Sean O’Neill
I wasn’t expecting to run into Highgate at last week’s BLLA Boutique Hotel Investment Conference. The New York company, which owns hotels and manages them for third parties, has not been considered a player in the boutique or luxury segments..
Highgate has 560 hotels in its network, including 420 select-service brands, including those under the LaQuinta by Wyndham brand. It has some 90,000 rooms under management. It says it is the second largest hotel management company in the US after Aimbridge Hospitality. It says it is the largest operator in New York City, with more than 35 hotels.
Last September, Highgate named Arash Azarbarzin as CEO, and one of his directives is to grow the company’s portfolio of luxury and lifestyle properties.
Azarbarzin has a background in luxury and lifestyle, having served as CEO of SH Hotels & Resorts, whose luxury brands include 1 Hotels and Baccarat. It is building on Highgate’s current collection of approximately 60 luxury and lifestyle properties, including Boston’s recently renovated grand dame of hotels, The Newbury, New York’s newly renovated Park Lane, Miami Beach’s The Goodtime Hotel and the Hotel Figueroa in downtown Los Angeles.
Azarbarzin said Highgate is in the mood to buy.
“We’ve looked at at least 40 assets this year to acquire, and we didn’t win any of them because we’re not going to pay crazy money,” Azarbarzin said. “We try to find assets that are off the market. Azarbarzin said.
Expect Highgate to prefer to buy portfolios rather than individual hotels.
“Buying 125 hotels is much better than buying one and taking a risk,” Azarbarzin said.
That said, Highgate also likes one-off hotel purchases when properties are off the market and perhaps undervalued..
Highgate has had two off-market deals in the past year. It bought the 425-room, 40-acre Scottsdale Plaza Resort in Arizona, which it will invest $120 million in and reposition as two separate hotels. He also bought the Royal Lahaina Hotel on Maui. But one-off offers have been difficult as the pandemic has slowed supply growth in many key markets and caused some owners to be adamant about what asking prices they are willing to accept.
Highgate can bring industry best practices to new acquisitions, accelerating a hotel’s performance, its CEO said.
Prior to the purchase, Royal Lahaina earned about $10 million in net operating income, or whatever money was left after expenses. Highgate updated the hotel’s website and added better revenue management software. of NOIs [net operating income] in a year, without renewal,” said Azarbarzin. One trick was that he took control of ticket distribution for his Royal Lahaina luaus, a traditional Hawaiian party with entertainment. of approximately 30 percent. Highgate brought ticket sales mostly in-house, cutting commissions to around 5 to 10 percent. “Now we are doing 800 covers, compared to 700 a day, because by having direct control, we can guarantee seats and we have increased overall profits,” Azarbarzin said.
Betting on luxury hotels and lifestyle requires an investment in technology.
We are not talking about mobile check-in and keyless entry. We’re talking about hardware, like ensuring fast internet speeds throughout an entire property, no matter how old the structure. and demand) and tools to mine data and learn to anticipate what individual guests want most. Azarbarzin said Highgate is investing “millions” in technology, including through a contract with travel technology company Cendyn.
Stellar food and beverage offerings are also key for luxury and lifestyle properties. So Highgate has invested in these capabilities.
In March, Highgate announced TableOne, a laboratory to research and develop hotel restaurants, in partnership with celebrity restaurateurs. TableOne is led by CEO Patric Yumul, who ran award-winning chef Michael Mina’s Mina hospitality group, along with half a dozen Mina alumni. It has 18 restaurants in development at Highgate hotels. “Mina has one of the best recipe sharing systems in the country,” Azarbarzin said. “If we’re looking for a recipe used in one of Mina’s 50 restaurants, we can log in and get what we need.” “Sometimes when you rent your restaurant to a third party, even if it’s the best restaurant in town, they don’t care about the guests upstairs, like a group that comes in and needs priority for a special table,” Azarbarzin said, explaining the investment. .
One of Highgate’s most distinctive endeavors is to begin promoting itself as a brand..
Most guests are unaware that they are checking into a Highgate managed or operated hotel. Azarbarzin wants to make Highgate a brand that is recognized by consumers. This is relatively unknown among management companies. You are creating a Highgate website where guests can book your hotels. Will someone really click on a hotel because of its management company’s brand, rather than checking reviews on Google and elsewhere? The tests will reveal the answer to that. Meanwhile, Highgate claims that some of its properties have direct booking rates of between 40 and 70 percent. So some repeat visitor marketing efforts can help guests connect the dots.
I expect Highgate to make at least one flashy move before the end of the year., regardless of concerns about broader economic dynamics. Given how ambitious Azarbarzin is, and how it has been revving up Highgate’s metabolism, more news will be coming soon.
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Source: skift.com