Investor appetite for luxury hotels in the U.S. has always been high. In gateway markets, where barriers to entry remain relatively high, acquiring high-end hotel assets is the quickest most efficient way for an investment group to get into a city. Not long ago, when a large, high-end asset came to market, there were a handful of foreign buyers, particularly Middle Eastern sovereign wealth funds. The other set—the majority—were U.S.-based private equity shops and real estate investment trusts, the Blackstones and Strategics of the world.Read More
NATIONAL REPORT—The EMV liability shift is here. Have hotels adequately prepared for this milestone?
On October 1, major U.S. credit card companies such as MasterCard, Visa and American Express will officially migrate over to EMV (Europay MasterCard Visa) standards, in which a microprocessor chip has been added to the card to reduce vulnerability to fraudulent in-person transactions. There are significant implications for merchants—most notably, a liability shift from the credit card company to businesses if a chip card is presented and the merchant does not have an EMV-capable point-of-sale (POS) system.Read More
Cross-border investment in U.S. hotels is a storyline that is not going anywhere quick. Foreign buyers are emboldened by the perceived safety of U.S. assets, particularly trophy properties in the top markets, which is why foreign investments into hotels could reach a record high this year.
To be sure, an attractive U.S. market coupled with some foreign governments relaxing laws that historically impeded foreign investment are the impetus for all this foreign direct investment, but investors still need to be cautious and understand U.S. laws and customs, so that their investment is safeguarded, particularly at the time of disposal.Read More
The Caribbean island of Puerto Rico might be a U.S. territory, but it's economy is not yet firing like the mainland's is. Turns out, its greatest resource, tourism, is how the Puerto Rican government believes it can solve its economic woes. It's not the only one who thinks that; U.S.-based investors are swooping down on the island in search of hotel assets to ride the rebound, while foreign investors might be next to dip their toes.Read More
NEW YORK—Hotels in major North American markets are continuing to experience strong growth driven by increases in average daily rate (ADR), according to data from the July 2015 TravelClick North American Hospitality Review (NAHR). Strong rates and steady bookings are leading to a significant uptick in revenue per available room (RevPAR).Read More
Keynote speakers and workshop panelists at the 2015 NYU International Hospitality Industry Investment Conference, held June 1 and 2 at the New York Marriott Marquis, highlighted positive industry fundamentals that support a very optimistic outlook for the hotel industry. The tide of optimism spread through some 2,300 attendees from every corner of the industry. Increasing hotel supply and rising interest rates remain the most conspicuous potential stumbling blocks in the current economic cycle. Concerns, however, were all but assuaged by encouraging presentations from some of the industry's most prominent figureheads.Read More
For owners of hotels, this might be the right time to refinance your assets through a commercial mortgage-backed securities, or CMBS, loan. CMBS isn’t the right refinancing vehicle for every situation, but it can provide some benefits to the borrower not available from other financing sources.Read More
The hotel industry had a near-record year in 2014, and the future continues to look bright. This might be the ideal time to consider new hotel development, and while it’s not as easy as it once was, financing is available for many kinds of hotel construction projects.
What does it take to get funding from a hotel lender for a new development project?Read More
The theme of this year’s Hunter Hotel Conference is “The time is now,” and speakers have been overwhelmingly vocal that whether it’s buying or selling or raising rates, now is the time to act on favorable market conditions.
Suril Shah (shown at right), head of North America hospitality acquisitions for Starwood Capital Group, summed it up by saying “it’s time to take a bold step with your portfolio.”
“Transaction volume in 2013 was way up, and now we’re looking at a 10- to 15-percent increase in [global] transaction volume in 2014, even with Asia dipping,” he said. “People with assets will benefit. If you are looking to sell; now is the time to sell. If you’re looking to recapitalize, it’s a good time for recapitalization or refinancing, especially with interest rates where they are.”
You’re well into planning a new hotel. You’ve picked the market, you’ve seized on a segment, a seasoned management team is ready to work with you, and you’ve locked down a trophy flag.
A lender will talk to you if you come to the bank armed with all this, even if it’s your first venture into hotel development. It’s common sense: Lenders offering conventional loans want to avoid risk and make money. So fortifying yourself with expertise, insight and the best possible location for the project presents an appealing picture.
Oh, yes. The other factor in this complex equation is a development plan backed by 30 to 35 percent equity. Gone are those pre-recession days when lenders were willing to bet the house, offering low-interest loans of up to 80 percent. These days, a lender wants skin in the game.
For you, the borrower, the trick is to think like a lender.Read More
Whether it’s borrowing or financing, stick to your knitting and go with what you know. Proceed, but proceed with caution. Don’t be afraid to take risks, but make sure to manage them.
Lenders like to see that you have a proven track record in a specific hotel niche and will be more likely to help you continue with these projects as long as you don’t venture too far away from what you know.Read More
Where are we in the recovery cycle? Are we at the top yet? More than likely, we are still somewhere on the way up.
Regardless of where the hotel industry is on the road to recovery, there is one word of caution: the low interest rates that have ruled for the last five years are sure to come to an end, and in fact, they’re slowly creeping up. Interest rates cannot stay at historical low levels forever.Read More
There are advantages to building a hotel. There are advantages to buying one. How do you decide?
There is no single clear choice. Which route you take depends on the market, your access to financing, and the ROI your investors require. Also key: your personality and the culture of your company.
No matter which route you take, you have to evaluate the overall market, inventory and analyze the hotels and segments that exist in the community you want to enter, and cost out labor and supplies. That’s primarily the territory of a new-build.
If you want to acquire an existing hotel, figure you’re going to pay more of a premium for a strong-performing property because it’s already stabilized and ramped up and is generating positive revenues and cash flows.
Another factor to consider is...Read More
As a hotel developer, you want to strike the best financing deal possible. You have a healthy relationship with your local bank, so the possibility of securing a loan from it is good. Trouble is the terms may not be in line with your investment strategy.
Lenders will provide some cash out to further improve the asset being financed but it’s tough to get cash out of conventional lenders to use for other acquisitions or developments.
What’s the alternative?Read More
Talk about the Federal Reserve pulling back on its buyback of U.S. Treasury notes is roiling the market and driving up interest rates. Federal officials qualify that unsettling conversation with assurances rates will stabilize, but the truth is, they’re not likely to. In fact, they’re likely to continue rising.Read More
f you’re a seller today, you don’t want to feel like you’re selling your property at a low valuation and leaving money on the table. And as a buyer, you should feel like you’re getting fair value with some upside. It’s incumbent upon the buyer to know what that upside is.Read More
RevPAR is up, room rates are up, travelers are back, REITs have made the hotel ROI they wanted, and hotel valuations are nearly the same as they were in 2007, before the Great Recession hit. It sure feels like we’re in the middle of the game – which is a lot better than being at the bottom.
All these factors make this a good time for buying or selling hotels. At the same time, caution is key.
Some don’ts and do’s:Read More