Highgate Hotels, which has more than 500 owned or managed properties globally, but not a true brand, has one now.
The New York-based company announced it has acquired the lifestyle-to-luxury Viceroy Hotels & Resorts for an unspecified sum with the transaction expected to close early next year.
The deal is part of a growing trend of larger companies in the hospitality space bolting on smaller ones that, in many instances, have peaked or can’t accelerate further without the backing of a more deep-pocketed player.
For the buyer, it means building up scale in an environment that makes it necessary to survive.
Viceroy’s 10 current hotels, with two more reportedly on the way in Portugal and Panama, will likely be folded into Highgate’s Lifestyle & Luxury division, joining such other hotels as The Knickerbocker and Park Lane in New York. (Viceroy had a hotel in New York up until 2019 when it was reflagged as Le Méridien New York, Central Park, under Marriott.)
For Highgate, the deal may be more about the management contracts than the brand, with some key assets, including Viceroy Los Cabos, Viceroy Chicago and Sugar Beach, A Viceroy Resort, in St. Lucia.
Highgate said it now aims to add hotels to the Viceroy portfolio in “key urban gateway markets and select resort destinations” in the coming months.
According to Daniel Lesser, president & CEO of LW Hospitality Advisors, the move is precisely more of a management addition play than a pure brand play. “Highgate is front and center in the management business,” he said. “It’s no big secret that the smaller platforms have been getting gobbled up for quite some time now,” referring to the likes of third-party management companies like Aimbridge and Remington snapping up smaller management platforms, or lodging company moves, such as Wyndham Hotels & Resorts’ acquisition of Europe’s Vienna House brand, Accor’s acquisition of 21C Museum Hotels or, more recently, Hyatt’s deal for Dream Hotel Group.
“Smaller platforms get to a certain plateau where, unless a significant amount of capital gets injected, they can’t get to the next level,” Lesser said.
The Viceroy brand has strong cachet, but losing its New York flagship, following other losses in Abu Dhabi, Palm Springs and Anguilla, is hard to overcome. The fact is that Viceroy was a smaller brand company that had yet to hit a critical mass. As Lesser pointed out, companies nowadays launch one hotel and call it a brand. “Somebody opens up an independent hotel, right? Whatever it’s called, it’s a new brand,” he said.
The reason for the deal is readily evident to Richard Russo, principal at Highgate, and steeped in the legacy Viceroy has engendered over the years. “Viceroy has built an outstanding customer reputation due in part to its strong service culture and incredible team,” Russo said. “Through complementing Viceroy’s platform and DNA with Highgate’s diversified ability to grow through real estate acquisitions, development and third-party growth channels, Highgate intends to add brand-accretive hotels to the Viceroy portfolio that will further enhance customer perception and brand awareness. Further, through powering Viceroy with a proprietary relationship with Highgate’s operating company, and imparting the benefits of Highgate’s scale, we will be able to provide significant incremental value to associates, guests, owners and partners.”
Viceroy will undoubtedly get supercharged through Highgate’s vast operational technology and scale.
Said current Viceroy CEO Bill Walshe, “We are excited for Viceroy’s future and we believe that this acquisition will not only fuel the future expansion of our brand but also give us a true partner, one who will offer incredible support, opportunity and collaboration. This deal will accelerate our momentum, and solidify our position as the leading modern luxury lifestyle brand in our space.”
There was no word if Walshe will remain CEO or be absorbed into the Highgate executive ranks.
As Lesser put it, at the end of the day, this deal was likely more about acquiring the management contracts. “The brand,” he said, “is the whipped cream atop the cake.”