Lodging development executives have the pulse of what type of hotels today’s owners are interested in. They also have seen the financing struggles hoteliers are dealing with. At NABHOOD’s 27th annual International African American Hotel Ownership & Investment Summit & Trade Show at the Miami Marriott Biscayne Bay, leaders discussed these topics.
Moderated by Stacy Silver, president, Silver Hospitality Group, the panel for the “Executive Development Forum – When will the market be back?” session included Bill Fortier, SVP, development, Americas, Hilton; Chip Ohlsson, EVP/chief development officer, Wyndham Hotels & Resorts; Adam Sherer, SVP, development, Marriott International; and Julienne Smith, chief development officer, Americas, IHG Hotel & Resorts.
The panelists were first asked where deals were currently being had.
For Hilton, Fortier said, it’s focused-service hotels. “They’re cheaper to build and a little easier to finance if you’re going to do new development,” he said. ” Buying existing hotels also is probably the other way you can get deals done in this industry today. If you are looking for your first hotel, buying a small, focused-service hotel is a great way to get started, and you can get deals done.”
Sherer agreed with Fortier and added, “Conversions are also another opportunity in the space, and we all have some version of a Collection brand that’s also as a nice opportunity.”
Financing a hotel has been a challenge in the industry. Smith said it’s because of the current interest rate.
“It’s at its highest point since the ’80s so that ROI thesis that someone went into when an owner purchased the site is not exactly coming to fruition because of the cap stack and equity required,” she said. “So we’re seeing some creative places where debt is coming from. Some of the suppliers are creating lending arms, which is interesting. If you agree to put their systems in, they’ll provide the senior debt on smaller projects. So I would say there is capital out there. The question is do you want to ride with that interest rate until you can refinance to a lower rate, which we all think will happen toward the end of the year or next year.”
Olhsson noted that even with a high interest rate, there are opportunities for ownership.
“If you can make the hotel work in this environment, there is an upside to be had as rates start to come down and you can start to refinance,” he said. “I think the opportunity is with conversions. Getting new construction financing right now is a challenge. We have a lot of owners that are prepping for new construction. We’re finally seeing the price of land come down a little bit compared to what it was or at least stabilize. So there’s an opportunity there.”
He added, “Urban markets right now are still a little bit challenged, but the price has come down in some of the other markets and people are taking advantage of that. Beach markets are really strong, and you can get money in any of them. And then we still believe in the Great American Road Trip, where people travel the highways and byways. They realize what they lost during the pandemic when they lost the ability to travel, so they’re traveling more than they ever had before. They realize how important experiences are and how important it is to spend time with family.”
