UPDATES
SCOTT IN FOCUS AT OEH 10
RITZ-CARLTON ’ S TWEET BAR 12
FAIRMONT REDEFINES SUSTAINABILITY 12
LOOKING UP AT THE NEW SPIRE 14
ON THE WEB 18
Longtime hotel investor John Kukral is optimistic about hotel performance looking ahead but he told HOTELS in June that he ’ ll remain a cautious buyer as pricing is being pushed too high in some U . S . markets and is somewhat concerned about increasing interest rates .
Kukral — the founder , president and CEO of privately held Northwood Investors and former CEO of Blackstone Real Estate Advisors — says the investment market has been rejuvenated by the U . S . economic recovery and the strength of hotel performance fundamentals . Indeed , midyear data from Jones Lang LaSalle ’ s Hotels & Hospitality Group shows U . S . transaction volume already reached US $ 8 billion , a 50 % jump compared to the same period in 2012 .
“ REITs are very active buyers , so I think there is pretty strong competition for good assets right now ,” Kukral says . “ There is always a balance between demand for room nights across the U . S . versus what is being built . There is not that much being built across the U . S ., and given the continuing recovery in GDP , which historically leads to good room night demand , revenue at existing hotels should be in good position for the next five years or so .”
Investment outlook This does not mean Northwood Investors , which operates five of its properties under Northwood Hospitality , is set to join the buying spree . Instead , Kukral says his company will remain opportunistic and that he wishes Northwood had bought more resorts earlier in the cycle in markets such as the Florida Keys — where it purchased the 214-room Cheeca Lodge & Spa in 2011 — as prices increase and the Federal Reserve ’ s phasing out of quantitative easing could further spike interest rates .
“ We ’ re in uncharted waters ,” Kukral notes . “ Pricing is getting pushed artificially high . This has nothing to do with hotel fundamentals ; it ’ s more capital markets , and given that there may be a reversal of the policy of keeping interest rates artificially low , investors could be whipsawed by debt and short-term owners could see capital rates widen out .
“ It ’ s getting farther in the cycle for being able to buy and feel really good about the pricing you ’ re getting on assets ,” Kukral continues . “ Coming out of the downturn , our thinking initially was that people are still going to vacation at drive-to resort markets . That has proved true , and we wish we would ’ ve bought a lot more resorts in hindsight .”
The uptick in the U . S . hotel supply pipeline , after nearly disappearing in the depths of the economic downturn , is not dissuading Kukral from purchasing . “ As much as people hope nothing gets built because it will be good for real estate , it ’ s not good for the economy , and a strong economy is generally
8 HOTELS July / August 2013 www . hotelsmag . com