Tom Bardenett joined RLJ Lodging Trust a month after the company completed one of the most defining mergers to ever occur in the hospitality industry—the acquisition of FelCor Lodging Trust, which wrapped in August 2017.
The $2.7 billion all-stock transaction was named Merger & Acquisition of the Year in the Americas Lodging Investment summer awards for 2017. It was the first time two publicly traded hospitality real estate investment trusts (REITs) merged, and it immediately positioned RLJ to become the third-largest hospitality REIT in the United States.
Although his arrival at RLJ was a little behind the timing of the historic merger, Bardenett, the company’s chief operating officer, says that he’s quite familiar with hotel management and the parties involved. “My history was in third-party management,” says Bardenett, who was with Interstate Hotels & Resorts for twenty-seven years. “I had previously worked on a joint venture with FelCor in the early 2000s, and I also had managed hotels for RLJ right out of the gate before they became public in 2011. I had familiarity with both companies, their people, and the DNA of both organizations, so it was a natural fit for me to come in and join forces with RLJ.”
In addition to his extensive expertise in operations, strategic investments, and asset management, Bardenett brought another element to RLJ when it came to the integration process: a proven method that focuses on the three P’s—people, process, and product.
As Bardenett explains, when it comes to the people side of integration, it’s crucial to get to know individuals, understand how they work, and properly align their strengths within the company. When it came to assessing processes post-acquisition, Bardenett needed to analyze operations both from RLJ’s and FelCor Lodging Trust’s standpoints. By doing so, this enabled Bardenett to outline what the best processes would be in regard to managing profit and reducing expenses postmerger.
“Determining those processes and taking the best practices from each company is part of the integration,” Bardenett explains. “That’s where RLJ Lodging Trust is able to be better as one versus two separate companies.”
On the product side, Bardenett says from a company standpoint, it’s about determining where to allocate resources in order to not only ensure the company is getting a return on investment for years to come, but also providing renovations and amenities in order to deliver outstanding enhancements for guests.
“It clarifies things,” says Bardenett about the three P’s methodology. “You can run fast and get nothing done, but when you pay attention to structure and you really define where your focus should be, then it allows you to achieve superior results.”
The wheels for the merger kicked into gear in 2016, when FelCor began researching strategic alternatives, and the company’s board agreed to a stock-for-stock deal with RLJ, Bardenett says. FelCor determined that RLJ would be the best company to pair with when considering the balance sheet, team, and skill set. Although some FelCor properties weren’t compliant with RLJ’s investment strategy, the company is focused on bringing these assets into alignment.
“The management team is planning to sell some nonstrategic assets and pay down debt,” Bardenett explains, adding that the company plans to shed some of the larger resort-styled and lower margin hotels, as it did in December 2017, with the estimated $170 million sale of the Fairmont Copley Plaza in Boston.
The merger also brought in an abundance of value worth holding onto. “When you look at the rest of the assets and think of what RLJ acquired, there are a collection of high-margin, room-focused hotels, major brand families—Hyatt, Hilton, Marriott—and in urban and dense commercial submarkets,” he says. “Those are the hotels RLJ has always been willing to pursue.”
It all goes back as well to Bardenett’s methodology concerning the product side of integration. Bardenett and his team are more than excited about the opportunity around these properties in regard to not only driving revenue and minimizing expenses, but also delivering the highest quality for guests.
“We are enhancing that value for guests and providing the tools and resources to people in the field with our management companies to perform at their very best,” Bardenett says.
With his extensive experience and proven methodology, Bardenett’s peers are also taking notice of his leadership.
“I had the pleasure of working with Tom for many years, and I’m excited about working with him in his new capacity, bringing a true alignment to the ownership and management teams,” says John Rubino, executive vice president of Interstate Hotels & Resorts. “He’s an inspired leader with a drive for excellence in everything he does.”
RLJ Lodging Trust now has a portfolio of 157 properties, with about 30,800 rooms, located throughout twenty-six states and Washington, DC. The company’s hotels are geographically diverse and concentrated in major urban areas that Bardenett cited, providing the company with markets that provide multiple demand generators from business, leisure, and assorted travelers.
But beyond expanding the property portfolio, Bardenett says he’s particularly excited to be at the center of two formidable hospitality companies pooling their teams and best practices.
“We’re focused on coming up with the best way of handling procurement on energy, IT, and innovation in terms of how the guest experience can be enhanced,” Bardenett says. “Now that we have this scale, we believe it can produce better overall savings and opportunities to reduce expenses.”
There are also more ideas on the table in terms of how to sustain growth and long-term success. Although an initial injection of new properties is exciting, Bardenett says it’s important that RLJ focuses on sustainability in the long run. Value creation in its existing properties has to remain on the table, and one of the factors that RLJ found particularly appealing about FelCor’s portfolio was the opportunity to perform conversions on some of the properties.
“We’re not looking for something to make a quick hit,” he explains. “You look at an asset that’s running good numbers, but if you convert it to another brand or within the family of brands, then we think that will enhance the value. We’re always looking for something that has improvement opportunity and the capability to grow.”
In his twenty-seven-year history as a third-party manager, Bardenett says he has managed a variety of ownership groups that included public REITs, high networth individuals, private equity groups, and a variety of different owners. His most recent experience prior to joining RLJ was working as chief operating officer for Extended Stay America. While he says moving from third-party operator to running a brand is a move to be savored, his previous experience is paying off in spades.
“I understand all the sides of the triangle when it comes to who’s communicating with who,” he says. “When you understand that, it’s effective at producing results with the brand and the operator as the owner.”
In fact, Bardenett says, communication and human interaction are some of the keys to his long-term success in the hospitality industry and something he’s already bringing to the table at RLJ.
He says he always goes to properties and interacts with people—focusing on the talent and who various managers are surrounding themselves with in order to ensure sustained success. “I think about my early days when people took time with me,” Bardenett recalls. “I was asking questions. It doesn’t take much to share some knowledge and be a mentor—that’s my role today. I take that seriously, because I know what it did for me, and I need to give back. Every day, I’m learning what’s out there and where opportunities exist as the industry continues to evolve.”
As that evolution continues, Bardenett says he’s thrilled to find himself at the heart of it in one of the most recognized REITs in the market.
“We’re going to spend the next couple of years executing and seeing the fruits of our labor pay off. We’re excited about delivering on our promises.”
“You can hear the excitement in my voice,” Bardenett says. “People are going to look back at this particular merger and ask, ‘Did they produce? Were they able to execute?’ We’re going to spend the next couple of years executing and seeing the fruits of our labor pay off. We’re excited about delivering on
Photo: Courtesy of Tom Bardenett