Lark Hospitality announced a joint venture Wednesday with Life House Hotels that will create one of North America’s largest operators of independent boutique hotels.
Financial terms of the transaction were not disclosed. The companies said the venture will have a “nearly $1 billion portfolio” of small, lifestyle hotels with about 97 U.S. properties and 3,000 rooms.
Life House, backed by venture firms including Thayer Ventures and Inovia Capital, will remain “an important shareholder” in the joint venture, but Lark has a controlling interest. About 20 Life House employees will join Lark.
“The joint venture positions Lark to become North America’s leading hospitality choice for hotels under 150 keys,” according to Rob Blood, who founded Lark Hotels in 2012 and is now executive chairman of Lark Hospitality. Peter Twachtman is CEO.
The merger combines 50 hotels run under the Life House brand with Lark’s nearly 47 design-forward hotels run under several brands. Executives expect annual revenue under management to exceed $150 million next year, with a geographic footprint of 27 states.
The combined company has two business models: It will run hotels under the brands Lark Hotels, Bluebird by Lark, Blind Tiger, AWOL, and Life House. It will also run hotels under other company’s independent names on a third-party basis.
Giving Scale to Lark Hotels
In an exclusive interview with Skift, Blood said the joint venture provides Lark with strategic geographic clusters in California, the Rocky Mountain region, and Texas, creating hub-and-spoke expansion opportunities.
“What it also does to support our scale is it puts really important geographic dots on the map,” Blood said. “We will be able to put hub and spoke structures in terms of design and development teams in these high-demand, high-growth markets, which will give us more opportunity to support new owners.”
Despite its focus on smaller properties, Lark has demonstrated the profit potential of boutique, lifestyle, and “independent-spirited” hotels.
Lark’s loyalty program, which has 100,000 members, generates approximately one-third of portfolio revenue through direct bookings without commission costs.
Fresh Life for Life House
The deal represents a change of fortune for Life House, a startup that had raised over $100 million in venture funding but recently faced headwinds.
Under the deal, Life House’s hotel management operations will merge with Lark’s. Both operators use Mews software as a core system. Life House’s revenue management technology platform, Diamo, is being spun off as a separate venture.
Life House’s high-profile partnership with travel site Kayak to create branded hotels also unwound last year, and the startup’s founder resigned from the CEO role earlier this year. For a brief time, Booking Holdings’ Kayak had partnered with Life House to create Kayak-branded hotels, starting with Kayak’s first hotel opened in 2021. But by the end of 2022, Kayak chose to exit the business.
Earlier this year, Skift reported that some Life House owners were dissatisfied and wanted to end their contracts.
Blood said Life House had done great work to address previous customer satisfaction challenges under new leadership since March, “reestablishing properties.”
Making Small Hotels Profitable
Blood said that, before Lark, there was a notion that it wasn’t profitable to run “independently spirited,” boutique, or lifestyle properties at a property if they had less than 150 keys, or guest rooms.
“If you can bring sophistication to these smaller assets, there’s tremendous value to be created not only at the asset level but also at the parent company level,” Blood said.
The new stakeholders Thayer Ventures and Inovia Capital have typically sought classic high-growth, scale player startups to invest in. But Blood said Lark Hospitality would stick to “growing sustainably.”
It will compete with larger hotel management companies like Aimbridge, Benchmark, and Pyramid to operate independent hotels for owners in exchange for fees.
“We have so much more history of operating small, independent hotels profitably than other players,” Blood said. “If you’re a hotel owner choosing a management company, it’s really important to consider the experience. Does the company have any hotels in its portfolio that look and feel like yours?”
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