Now more than ever, scale matters in the hotel management space – good, bad or indifferent. It is harder than ever to generate efficiencies without it and it is harder to grow without being able to offer a breadth of services across segments. So, with a tagline “better together,” Benchmark Global Hospitality and Pyramid Hotel Group merged in late September to create Benchmark Pyramid with some 210 properties in the U.S., Caribbean and Europe, and about US$3 billion in annual operating revenue under management. But the deal, according to the two principal executives at the new firm, was far from just about creating scale. They say they were both looking for, and needed, the right fits in terms of strategy and culture to make a merger work, or at least work well.
CEO Warren Fields, formerly of Pyramid, and President Alex Cabañas, formerly of Benchmark, told HOTELS in October that the initial goals are simple: become the employer of choice as well as the manager of choice. It’s about becoming a one-stop shop for owners because of the new company’s expertise across independent, lifestyle, soft brands, full-service, select-service and resorts, as well as corporate conference centers. Benchmark Pyramid, essentially an equal merger between the two legacy companies, also offers hospitality advisory and technical services, from receivership and asset management to project management. “There really isn’t a single type of hotel that we can’t operate and operate effectively,” Fields said.
Benchmark Pyramid also has a European platform which will continue to be led by Frank Croston, CEO of U.K.-based Hamilton Hotel Partners. With so much fragmentation of management in Europe, the newly merged company sees plenty of opportunity there. The inside joke refers to Croston and Hamilton as the pretty hood ornament on the car. “I think there’s a lot of forward momentum in Europe and a lot of opportunity,” Fields said. “We know there’s going be a ton of growth in North America and the Caribbean, but Europe is such a nascent market for really good management and a market that’s shifting a lot.”
“[The merger] is about keeping things really interesting in the business, energizing our people behind that, making sure we’re delivering for our owners,” Cabañas added. “And if more growth comes as a result of that, it probably will because we’ll be good at what we’re doing. Owners will want to come back and people want to grow their career with us, and without all those things we can’t grow.”
The senior management teams (about 35 people) of the two companies actually came together just as the merger was announced, first holding separate dinners in side-by-side rooms and then together for a day to further align initiatives. Cabañas said it was a little weird and awkward, but the process actually worked out great because neither of the companies had any opportunities to celebrate in the previous 18 months. “And what happened in that room? Warren and I got kicked out for half the time, which is probably appropriate,” Cabañas said. “It was transformational… There were 17 people from each side and a lot of people from two relatively mature organizations didn’t know each other. We were only 14 and 15 days in, and not all leadership decisions had been made. So, lots of people were saying, ‘what’s in it for me’ and there were all kinds of reasons for that to be ok. And the day was a step forward – it was a triple jump forward with people realizing we’re actually a lot more the same than we are different. We have similar core values and what we believe in is very similar, if not identical. Now the combined business is learning to work together and align in the best interest of the company.”
In fact, since the deal was in motion for almost 12 months, an integration team was in place for the last six months to make sure there was no lack of communication, the one detriment that could lead to failure in a new organization. “There’s absolute clarity about our vision, and alignment of our investors is a huge piece of why this is working,” Fields said.
The newly formed organization has already been working on all the quick wins, such as insurance premiums, OTA contracts, connecting systems such as talent acquisition.
“We are already integrating a lot of our data at the parent company level, using Pyramid’s incredible intelligence platform,” Cabañas said. “Success is where we keep growing the business but growing in the right way. And more than anything, it’s about retaining the current team and current owners… We don’t want to lose sight of the business, so part of the integration effort has been not to burden the properties at all.”
Further on the development front, the two new business partners were not offering particulars on growth plans or expectations, but Fields added, “We should be in the conversation for a lot more things together than we were singularly.”
When asked about the potential of a portfolio deal, Fields said if the right opportunity showed up, they’d certainly entertain it, but there was nothing imminent in October. “There’s a lot of upside with the two organizations that we have right now,” he said.
That upside includes the backing by each company’s respective longtime investment partners, Gencom and TZP Group, led by Karim Alibhai and Sam Katz, respectively. Serving as co-chairs are Pyramid Hotel Group co-founder Rick Kelleher and Benchmark founder Burt Cabañas. Former Ritz-Carlton chief Simon Cooper also sits on the new company board. “We feel really good about the senior executives of our board and how they can help us,” Fields added.
To make sure all parties come together and succeed, Fields said Benchmark Pyramid must empower employees and associates at every level. “If we fail to empower our employees and associates at every level, if we don’t allow people to fail by attempting to do the right thing, there’s the act of omission… We have to create an environment where people are willing to take a little bit of risk, where they’re willing to ask for forgiveness, not for permission… The only potential weakness I see is us looking in the mirror and not trying to do the right thing.”
That is why Fields and Cabañas say they are spending a lot of time and money to bring people together in the right settings, while at the same time staying focused on the job at hand. “Another bit of an inside joke has been ‘everything is different but little has changed,’” Fields said.