DALLAS, TX—The 2014 Executive Roundtable, “Thinking Outside ‘The Box’: The Challenges and Rewards of a Diverse Portfolio,” was held here yesterday at La Quinta Inn & Suites Dallas North Central.
Presented by Hotel Business, hosted by La Quinta Inns & Suites, and sponsored by Sonifi Solutions, BDNY and the International Hotel, Motel + Restaurant Show (IHMRS), the roundtable was moderated by Stefani C. O’Connor, executive news editor, Hotel Business, and managing editor, Roundtables, Hotel Business.
One topic the panelists discussed was where the opportunities are for hoteliers. “There are still two hotel businesses,” said Peter Connolly, EVP/Operations & Development, Hostmark Hospitality Group. “When we talk about 8-10% RevPAR, we’re really talking about the top 25 markets. But if you look at the greater America, and particularly focus on cities that have had substantial declines in air traffic, even places like Providence, RI, which used to have 25 flights a day and now has six, those cities have not recovered… so there is still quite a bit of distress out there. If there’s value add these days, it’s there; no one is doing a value add deal in New York City.”
Edward Hoganson, EVP & CFO, Crestline Hotels & Resorts, noted that he’s not seeing that many distressed properties because the economy is improving, cap rates are dropping and cheap debt is available. “So we’re not seeing as much of the distressed, especially with major brands,” he said. “But we are seeing a lot of assets coming to market because they have to put in a renovation or the term of their investment has expired. We’re seeing a lot more assets and portfolios coming to market, and the sellers are trying to take advantage of cap rate compression and cheap debt.”
Raj Trivedi, EVP/chief development officer, La Quinta Inns & Suites, agreed. “What has happened is that wherever you have opportunities for hotels at somewhat below replacement costs, you have the brand element that you have to do the upgrade, and all of a sudden it’s taking you close to or about replacement cost,” he said. “So the opportunities that used to exist three years ago are not there as much.”
Mary Beth Cutshall, SVP/acquisitions & business development, Hospitality Ventures Management Group, noted new construction also is affecting the ability to upgrade brands on an acquisition. “It’s becoming more difficult to convert to a brand because of the environment where new development is more plausible,” she said. “A lot of the brands are saying No. I have the opportunity for new construction so I’m not going to allow that asset to convert.”
For more coverage, look for the Executive Roundtable editorial feature in the October 21 issue of Hotel Business.