Geolo Capital's John Pritzker On The Company's Next Moves After Its Sale Of Two Roads Hospitality
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Geolo Capital and Lowe Hospitality Group’s sale of Two Roads Hospitality to Hyatt Hotels Corp. is among the largest sales in the industry this year. Several other large acquisitions have taken place this year as part of a larger trend of consolidation within the industry.
LaSalle and Pebblebrook are moving forward with a $5.2B merger, Marriott is now up to 30 brands after several acquisitions over the last few years, and Lockwood Development Partners is considering an acquisition of Anbang’s $5.5B hotel portfolio.
Bisnow caught up with Geolo Capital founding partner and director John Pritzker to learn more about the Two Roads sale and industry consolidation, the current state of hospitality and Geolo’s future developments.
The idea to sell was sparked when his company received interest from two parties last spring. Pritzker said while the thought was to eventually sell the company, it had not occurred to him at the time. His company hired Moelis & Co. to help widen the search and look for additional opportunities.
“It was a win-win-win-win for us. It was a win for Hyatt, a win for our owners, a win for our employees and a win for my mother because we kept it in the family,” he said.
His brother, Thomas Pritzker, still chairs Hyatt, which was founded by their father, Jay Pritzker, in 1957. John Pritzker left Hyatt in 2010 when he sold his interest in the company to other family members.
Geolo Capital made its first hotel purchase in 2009 when it bought Carmel Valley Ranch. Two Roads Hospitality was formed in 2016 after Geolo-owned Commune Hotels and Resorts merged with Lowe Hospitality Group’s Destination Hotels, creating the largest global collection of lifestyle hospitality brands. Commune Hotels had previously acquired Thompson Hotels in 2013 and Alila Hotels in 2014.
At the time of sale, Two Roads Hospitality managed 85 hotels across eight countries worth $2B in property revenues under management.
Pritzker said much of the consolidation occurring in hospitality is similar to what happened in the airline industry over the last few decades. When he was younger, there were 30 airlines and now there are about eight that control air travel.
“It’s a function of scale and a function of technology what’s going on in the [hospitality] industry,” he said. “We built a company that fit into Hyatt’s strategy going forward.”
It is tough to be in the industry if you don’t have distribution or girth, he said. When he started Geolo in 2009 and later acquired Joie de Vivre in 2010, his team never had a desire to grow too big, but to focus on artisinal hotels with unique designs, experiences and services.
He said the timing of the sale really was a matter of an expression of interest that came from the market. Geolo will remain the largest owner of Hyatt-managed hotels after the sale.
Geolo Capital's Next Moves
The company plans to redeploy the capital from the sale into lifestyle real estate, especially hospitality and multifamily, Geolo Capital co-founder and managing general partner Thomas Gottlieb said in a press release about the sale.
“There’s no lack of opportunities out there,” Pritzker said. “You just have to pick and choose.”
The type of opportunities for investing in a new hotel property will largely depend on the city. Adding residential to a hotel project could be better suited in one city while microhotels, which typically offer smaller, denser rooms with limited services, may be better suited for another.
“One of the things we’re really excited about at Geolo is just the landscape is really fertile and we love partnering with local developers,” he said. “They know their neighborhood better than anybody.”
Geolo is doing just that with several of its upcoming developments around the country. It partnered with Boston-based JW Capital Partners to develop a 225-room Thompson D.C. hotel to become the first boutique hotel within The Yards, a 48-acre waterfront mixed-use development from Forest City. The hotel is expected to be completed in 2020.
He said he is excited about the new Capital Riverfront neighborhood where the hotel will be located. The emerging D.C. neighborhood is thoughtfully planned and there will be a good mix of restaurants and retail, Pritzker said.
The mixed-use hospitality and residential project Fifth & Brazos will have a total of 400 rooms split between two hotels. The Thompson Hotel will have 211 rooms while the tommie Hotel will have 190 microhotel units. The hotels are expected to open by the end of 2020.
Hospitality Market Remains Strong
In the San Francisco Bay Area, where Geolo Capital is based, the investment firm is looking into new opportunities, but the market is very tight. Pritzker's company has been wanting to bring a hotel similar to Carmel Valley Ranch to the Napa or Sonoma area, but finding an ideal site has been a big challenge.
“It’s just really difficult to find the land and really, really difficult to get permitted,” he said. “If you’re here, it’s great, if you’re not here, it’s tough.”
Pritzker said the Bay Area remains a vibrant hospitality market.
“Tourism is a mainstay in the city and the economy of the city is very strong because of the tech sector,” he said. “We have a lot of travel in and out and it’s vibrant.”
Comparatively, a market like Chicago is much softer and is dealing with oversupply and fewer citywide conventions. He said one of the biggest challenges San Francisco continues to face is cleaning up its streets.
The addition of disrupters, like Airbnb, has not slowed the industry down.
Pritzker said while the industry was slow to acknowledge the traction Airbnb was getting, there are now iterations of the Airbnb theme showing up. Companies are starting to build apartment buildings as Airbnb-friendly properties while others are incorporating some Airbnb-type elements into their operations.
“One day I wouldn’t be shocked to see Airbnb get into the hotel business,” he said. “There’s the question of millennials getting older and beginning to have kids and wanting more full-service than what an Airbnb provides.”
Technology also is becoming more important in the industry, he said. Alexa is one example of technology being integrated into rooms to allow guests to more easily control heating, lighting and power in their rooms, Pritzker said. Rooms also have better WiFi and wireless charging.
Keeping up with technology is key because guests want to be as productive as possible and that means having access to technology to keep them connected.
“Technology is such a critical element from small things like bedside charging to staying ahead of the curve when you can,” he said. “That’s what’s going on.”
Regardless of individual market performance, disrupters and the impact of technology, the hospitality industry is thriving. By June, the industry reported an increase in revenue per available room for the 100th month in a row, the longest recorded streak of growth in RevPAR in recorded history.
“It's been very strong and continues to be very strong,” Pritzker said. “I’m a big fan of hospitality — not out of necessity; I love being in the space.”