Sunday January 6th, 2013 - 10:33PM
CHICAGO—During his three-decade hospitality career, Arthur Adler has survived his share of economic cycles, but the depth of this most recent business cycle has put even more pressure on companies like Chicago-based Jones Lang LaSalle (JLL), where Adler has held the helm for the past decade as Americas CEO and Managing Director of the firm’s Hotels & Hospitality Group. The changing market has led Jones Lang LaSalle to diversify its services as a way to increase its share of the pie.
According to Adler, the publicly traded brokerage firm, which generated some $3.6 billion in U.S. revenue in 2011, has done just that. Jones Lang LaSalle now holds the No. 1 market share position for hotel investment sales transactions domestically. While the firm has led hotel transaction market share globally since the business was formed in 1999, the firm has reached this height in the United States for 2012.
The firm’s 250 dedicated hotel and hospitality experts partner with investors and owner/operators around the globe to support and shape their investment strategies. Adler noted the company has the ability to “source capital all over the world,” in addition to its many other services, which include capital markets, advisory services, valuations and investment banking, to name a few.
He acknowledged one of his chief areas of focus has been on “achieving number one market share in the U.S.” He added the firm’s achievement is in large part because the hotels market has “more product on the market in the U.S.” and that JLL has better access to global capital than any other firm.”
One potential avenue of growth for the company in the U.S. is capital markets, which Adler described as financing services outside of an investment sales transaction, where his team is working for the buyer sourcing debt and equity financing, mezzanine or joint venture equity and note sales transactions. In 2012 alone, Adler’s hotel transactions business completed more than $4.6 billion in investment sales and debt and equity transactions, and he doesn’t expect the pace to slow in 2013. He also noted the company is looking to grow its advisory and asset management businesses in the U.S., which provides a strategic advice to owners of hotel assets, including valuation; sell vs. hold decisions, and acquisition due diligence, profit improvement strategies and the like. While all the aforementioned services can go a long way toward helping the company reach its goal of being a market share leader, Adler touted both the quantity and quality of his people.
“We’re focused on bringing the most robust global and local expertise to our clients, and building connectivity between our regions to better serve our clients. To do this the firm has brought on senior transactors in New York, Chicago, Los Angeles, Atlanta, Miami, San Francisco and Dallas.”
Another point of differentiation for the company, according to Adler, is the continued emergence of its select-service business, which he touted as the “best in the country.” Adler emphasized the select-service business, which focuses primarily on the sale of limited service hotel portfolios and individual deals less than $20 million, has “grown dramatically” since being formed in 2005. “There’s more investor interest in select service than there’s ever been,” he said.
JLL expects overall transaction volume in the U.S., slightly up in 2012, to be approximately $16 billion. By way of comparison, in 2010 sales volume was at $11.6 billion, up dramatically from 2009 when it dipped to $2.1 billion. Adler noted that 2013 should have a slight uptick with a real spike coming in 2014 and 2015, when he predicts sales volume will “take off” and grow roughly 10% to 15% in the Americas. Adler noted, “One of the key factors motivating sellers will be the appreciation of hotel values in the coming years.”
Additionally, Adler expects a spike in property values. “They are slowly on the rise. It’s actually healthy to have slow steady growth instead of a hockey stick,” he said. He noted he expects more properties to come onto the market in 2013 and 2014 as the result of maturing CMBS loans and additional activity coming out of the special servicer market.
He is also bullish based on many of the fundamentals both within the industry and as they relate to financing. Within the industry, Adler noted, supply will continue to be muted and group business is on the upswing. Meanwhile, he anticipates cap rates remaining low and debt rates remaining favorable.
On another positive note, Adler maintains the consumer appetite for travel is higher. “It seems like the traveling public is a bit immune to stock market volatility and the European debt issues,” he said.
Adler mentioned other international markets as a key source of revenue, such as Hong Kong, Singapore, China, Dubai, and Abu Dhabi, where he noted he is “looking to bring investors in to the fold.” In terms of U.S. markets, he noted the company continues to focus on major U.S. markets such as New York, Washington, DC, Chicago, Los Angeles, San Francisco and Hawaii. While select-service will be particularly robust in Dallas, Houston, Kansas City and St. Louis.