Make no doubt about it, New York City-based owner-operator Highgate is in the select-service business. In fact, of its 533-hotel portfolio, 406 are select-service. Now they are making it official, exclusively telling HOTELS it is launching Highgate Select, a division focused on differentiated management and development of select-service, limited-service and extended-stay hotels.
“We are very bullish on this sector of the hospitality business,” Highgate Select Chief Operating Officer Rob Dann said. “We have a great platform that we’ve built. We’re looking for acquisitions, and we think we can do a great job with third-party management, as well.”
Highgate’s prominence as a private owner-operator in the select-service space has developed predominantly due to two acquisitions with partner Cerberus Capital Management. In March 2021, Highgate and Cerberus finalized its acquisition from Colony Capital of six portfolios consisting of 197 hotels with 22,676 rooms, in a deal valued at US$2.8 billion. This week, final approval was given to Highgate and Cerberus’ US$1.5 billion deal to acquire CorePoint Lodging, which includes a portfolio of 123 La Quinta-branded hotels. Previously, in 2011, Highgate acquired limited-service operator InnVentures and its 18 hotels to get its true start in the space.
“When we bought Colony, we built the platform to support that flex-service, extended-state portfolio,” Dann said. “Now we’re officially coming out from behind with this division that we’ve put together with this CorePoint acquisition.”
To oversee the Select portfolio across 33 U.S. states, Dann is supported by a multidisciplinary executive team with an average of 30 years of hospitality experience. Within the division, emphasis is placed on empowering GMs to take ownership of their hotels by extending lines of communication, including transparency and exposure to executive leadership.
Dann said Highgate’s approach to select-service management somewhat flips the traditional model, decentralizing a lot of the operations. “What we found when we bought the first portfolio is that the select-service world is more of a centralized model. With us, we push the day-to-day operating of the business back out into the field and almost decentralize the model,” Dann explained.
However, Highgate centralizes support systems that include technology like 24/7 revenue optimization monitoring to help generally less-experienced GMs. “It’s definitely different from the rest of the way the select world is being managed,” Dann added.
Dann further explained that when Highgate bought the Colony assets it created what the call “geo-clusters” to help drive top line revenues. In the geo-cluster are sales, revenue management and digital experts who extract all those skill sets out of the assets and put them into a centralized office, which also serves to create headcount efficiencies. “They’re capturing business and spreading it out into the hotels [in that cluster], which has made it very efficient and allows us to be almost monopolistic in geographic clusters. And that monopoly really works now since we have more mass and hotel count. We have all sorts of different brands in the same marketplace, and we can control the business and disperse it, depending on the price tier in that market.”
Highgate also uses area managing directors to oversee multiple assets in the same geographical areas. “All these efficiencies create cash flow and better bottom lines,” Dann said.
When asked about further growth of Highgate Select, Dann said they are taking advantage of situations that are brought to them, adding Highgate is seeing deals daily. “We have all the firepower we need to do deals. But we have no goal in mind,” he said.
Bottom line, Dann said, is that Highgate, like many other investors these days, thinks it is a great time to be in the select-service business. “It’s obviously a great, efficient model, and with the platform that we’ve built, we expect that deals will work better for us.”