At this time each year I am asked by Hotel and Real Estate Publications and Associations for a short review of the last year with some predictions for the upcoming year. While reviewing some of my past articles I came across the 2103 predictions and the heading was” Regional owners and local operators in general are optimistic about the upcoming year”. It is safe to say that was correct then and is still the pervasive thinking. Again as I stated last year the “transaction Market is not so clear”. Our firms year over year transactions have increased each year for the past 4 years and we are hopeful this will continue. The big problem this year may be finding enough good product to sell, there are not many hotel offerings available at the current time throughout the northeast but our current inventory of properties for sale and some others that will be coming to market bears well for us. It appears that most of the foreclosures and short sales with a few exceptions are over but the combination of low inventory of product, reduction in problem properties and solid industry fundamentals would indicate that new hotel construction should increase. This is especially so for Hotel Companies that are looking to grow their portfolios to meet market demand. There is a down side to this in that more rooms could effect rates negatively especially in the older hotels and increase the number of hotels suffering from functional obsolescence. We have actively created associations with real estate development companies who need the superior locations of many of our older hotels for redevelopment. I thought this would happen in greater depth a lot sooner but the great recession pushed it off for a while but in 2013 there was much more activity and it will continue at a greater pace.
The most often question I get is how “is there financing available”. The answer is yes but a prospective buyer should not be concerned about that when looking for or making purchase proposals. There are always means to get to closing and when it comes to financing “where there is a will there is a way”.
Another interesting trend is the number of hotel ownership groups that are actively seeking “Institutional Style” hotels such as Hilton and Marriott products, Holiday Inn Express and similar. They see adding higher quality hotels as a means to address the change in the market and know they need some quality properties in order to survive. They realize that they will have to live with lower capitalization rates in order to complete with the Hotel REITS. This bodes well for companies with larger portfolios of well branded properties as they may be able to sell them as “one-off” transactions or it will be very beneficial to firms with well branded hotels in tertiary markets.
It seems that non-flagged boutique hotels are gaining in popularity; the guests are looking for quality and many multiple owners of these type of properties know how to keep their food and Beverage operations profitable. Of course the wedding business continues to thrive and most of the boutique hotels do a wonderful job of catering to that market.
More to come later but for now best wishes for a healthy and financially successful 2014. Please contact myself, Joe or Pete if we can be of assistance in any of your Hotel Real Estate needs.
Earle