Gap Widens Between Management Ranks

NATIONAL REPORT— While this year’s Top 100 Management Companies listing may not show a tremendous amount of growth on the part of the individual firms ranked, it has nonetheless been a year filled with activity. According to HOTEL BUSINESS® research, the top three spots on the 2003 listing remained the same, and in the same order as the prior year: Interstate Hotels & Resorts, now the combined forces of MeriStar and Interstate, at the top with 390 hotels managed and $2.5- billion in gross annual revenue for 2002; Destination Hotels & Resorts ranked second with 23 hotels managed and gross annual revenue of $557 million; and Tishman Hotel Corp. in the third spot with 21 hotels managed and $548.3 million in gross annual revenue for 2002. It goes without saying that there is a sizable gap between the number one player, Interstate, and the remainder of the participants in this year’s listing. But that can be explained rather simply. With more than double the gross annual revenue and number of properties in its portfolio than the number two management firm, Interstate’s commanding lead is a result of its merger last year with MeriStar Hotels & Resorts. The ensuing management powerhouse indeed dwarfs the rest of the players, and is a testament to the feasibility of transactions, even during these tough times. Several other proposed management mergers fell through, such as the one between AFM’s Northwest Lodging and Marshall Management, leaving those firms to their own devices as it relates to growth year-over-year. While the top 10 management companies ranked in 2003 are familiar names, their lineup looks slightly different than last year. Perhaps that is because many of these firms were affected, like most everyone else, by volatile industry and economic conditions. The result played out in a slight shake-up of contracts, with some assets being sold and contracts terminated, while other hotels fell into receivership and lenders sought new operational expertise. As such, some of the key players moved around a bit on the listing, including Ocean Hospitalities, which moved up from the number eight spot last year to the number four spot in this year’s ranking, and Lodgian, which dropped from number six last year to the number eight spot. New to the upper ranks this year is John Q. Hammons Hotels, which was not ranked in last year’s listing, with 199 properties managed, or 13,704 rooms, and gross annual revenue of $440.4 million in 2002. John Q. Hammons has been noted as one of the most aggressive players in the arena, using the company’s long-standing reputation and long-term relationships with owners to help maintain its business pace. Also new to the top 10 is CHIP Hospitality LP, with 36 hotels, or 8,084 rooms managed and gross annual revenue of $293 million. As for the money being pulled in by these companies year-over-year, a slight increase in gross annual revenue was noted for the top five companies combined at the end of 2002 vs. 2001. This year’s Top 100 Management Companies listing shows the top five companies reported $4.3 billion in gross annual revenue at the end of 2002 compared with $4.5 billion for the top five at the end of 2001. How will these hotel operations experts fare in 2003 as it relates to their overall profitability? The maneuverability of these firms to adapt to challenging fundamentals has already been proven, but just how they wade through this stormy year remains to be seen. When a dozen hotel management executives were polled during a HOTEL BUSINESS® Management Company Roundtable held last month (see Cover Story on page 36) regarding how the industry would fare this year, most said they expected the hospitality business to be down in 2003 vs. 2002. Being well capitalized with strong industry relationships is key to success in these times, noted experts. And keeping a watchful eye on industry conditions to respond to or anticipate trends also plays a big part in remaining profitable today