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.”
For Steve Joyce, president and CEO of Choice Hotels International (below left), now is the time to take advantage of financing picking up. “Don’t wait,” he said. “You want to open hotels, have three years or so to stabilize them, and then when the cycle turns you’ll be in better shape.” He said he sees increased interest in renovation, new construction and relicensing hotels as owners pick up assets and look to rebrand.
Jerome Cataldo, president and CEO of Hostmark Hospitality Group, and Todd Giannoble, managing director of Goldman Sachs, stepped outside the lines of investment forecasts and said the time is now to shake up the norm a little bit.
“It’s time to innovate,” Cataldo said. “We’ve come out of survival mode and now the focus should not only be on transactions and finances, but also on next-gen products and services.”
Giannoble was adamant in telling the audience the time is advantageous to raise rates. “Our industry, people and systems have never been more sophisticated,” he said. “We absolutely have to raise rates. If we do that, we can withstand the supply that is coming.”
Simmering below the surface of this bubbling optimism is a measure of caution and an attitude of making hay while the sun shines.
Giannoble said brands are playing a big role in supporting this measured growth approach. “They see that supply will grow slower and be more methodological," he said. "You’ll see more adaptive re-use and you’ll see transformative capital going into old hotels to make them new again and that will mitigate supply.”
Geoff Ballotti, incoming president and CEO of Wyndham Hotel Group, agreed with that forecast, saying new-build prototypes for brands keep properties fresh as the cycle continues. “One new-construction issue we see in the economy segments is that you have inventory going out of the cycle that isn’t being repositioned,” he said. “With that, new construction is coming in and that’s exciting.”
Joyce cited Choice’s capital investment in its brand refreshes, particularly Comfort Inn, as a measure to keep existing product fresh, even if it’s not new-build that adds supply. “Historically we’ve seen 2-percent supply growth, but we haven’t seen that lately since 2009,” he said. “I don’t want to get overly giddy about this environment but I think it’s really good!”
From an investment standpoint, however, Shah said, those with equity will not necessarily limit their looking to within domestic borders. “Our investors want us to go with the opportunities are,” he said. “You’ll see a lot more U.S.-centric investors moving to Europe as it gets tougher to find opportunistic investors here.”
Source: Hotel Management