The name Highgate 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 increase its footprint among high-end, full-service properties.
I wasn’t expecting to find Highgate at last week’s Boutique Hotel Investment Conference. The New York company, which owns and manages hotels for others, is not considered a player in the boutique or luxury segment†
- Highgate has 560 hotels in its network, including 420 select service brands, including LaQuinta by Wyndham. It manages approximately 90,000 rooms.
- 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 appointed Arash Azarbarzin as CEO, and one of his guidelines is to expand the company’s portfolio of luxury and lifestyle properties.
- Azarbarzin has expertise in luxury and lifestyle and was the CEO of SH Hotels & Resorts, whose high-end brands include 1 Hotels and Baccarat.
- It builds on Highgate’s current collection of approximately 60 luxury and lifestyle properties, including Boston’s newly renovated grande dame of hotels, The Newbury, New York’s newly renovated Park Lane, Miami Beach’s The Goodtime Hotel and downtown Los Angeles’ Hotel Figueroa. .
Azarbarzin said Highgate is in a shopping mood†
- “We’ve been looking at at least 40 assets to acquire this year, and we haven’t won any of them because we’re not going to pay crazy money,” Azarbarzin said.
- “We are trying to find assets that are not on the market,” Azarbarzin said.
Expect Highgate to prefer shopping for portfolios rather than individual hotels.
- “Buying 125 hotels is much better than buying one and taking a gamble,” Azarbarzin said.
That said, Highgate also likes one-time hotel purchases when the properties are out of the market and may be undervalued†
- Highgate has had two off-market deals in the past year.
- It bought the 425-room, 40-acre Scottsdale Plaza Resort in Arizona, in which it will invest $120 million and reposition it as two separate hotels.
- It also bought the Royal Lahaina Hotel in Maui.
- But one-off deals have been difficult as the pandemic has slowed supply growth in many key markets, while some owners are not flexible about selling prices they are willing to accept.
Highgate can bring industry best practices to new acquisitions, improving a hotel’s performance, the CEO said.
- Before the purchase, Royal Lahaina made approximately $10 million in net operating income, or the money left over after expenses.
- Highgate has updated the hotel’s website and added better revenue management software.
- “Within 30 days, we are now on track to do $40 million in NOI [net operating income] in one year, without renovation,’ Azarbarzin said.
- One trick was that it took control of Royal Lahaina’s distribution of tickets to its luaus, a traditional Hawaiian party with entertainment.
- The longtime operator had brokers sell tickets to its luaus and paid commissions of about 30 percent. Highgate largely self-managed ticket sales, reducing commissions to about 5 to 10 percent.
- “We are now doing 800 covers, at 700 per day, because through direct control we can guarantee seats and have increased the overall profit,” Azarbarzin said.
Betting on luxury and lifestyle hotels requires an investment in technology.
- We are not talking about mobile check-in and keyless entry.
- We’re talking hardware, such as making sure internet speeds are fast everywhere in a property, no matter how old the structure is.
- We’re also talking about software, such as revenue management tools (or using computers to set rates to best match supply and demand) and tools to mine data and learn to anticipate what individual guests might be up to. most desire.
- Azarbarzin said Highgate is investing “millions” in technology, including through a contract with travel technology company Cendyn.
The excellent range of food and drink is also vital for luxury and lifestyle properties. So Highgate has invested in these capabilities.
- In March, Highgate announced TableOne, a lab for research and development of hotel restaurants, in partnership with renowned restauranteurs.
- TableOne is led by CEO Patric Yumul, who along with half a dozen Mina alumni led award-winning chef Michael Mina hospitality group Mina.
- It has 18 restaurants under development in Highgate’s 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 out 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 coming in and needing priority for a special table,” Azarbarzin said, explaining about the investment.
One of Highgate’s most distinctive efforts is to market itself as a brand†
- Most guests today are unaware that they are checking into a hotel owned or operated by Highgate.
- Azarbarzin wants to make Highgate a brand recognizable by consumers. This is relatively unheard of among management companies.
- It is building a Highgate website where guests can book its hotels.
- Will someone really click on a hotel because of the management company’s brand name, instead of checking reviews on Google and elsewhere? Testing will reveal the answer to that.
- In the meantime, Highgate claims that some of its properties have instant booking rates between 40 and 70 percent. So some repeat marketing efforts can help guests connect the dots.
I expect Highgate to make at least one standout move before the end of the year† regardless of concerns about broader economic dynamics† Given how ambitious Azarbarzin is — and how he’s accelerated Highgate’s metabolism — it shouldn’t be long before there’s any news.
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