INVESTMENT
Buying into a rebounding market
THREE LEADING BROKERAGES OFFER OPINIONS ON M & A OPPORTUNITIES IN LIMITED-SERVICE , BIG URBAN BOXES AND RESORT ASSETS .
by JEFF WEINSTEIN , EDITOR IN CHIEF
So much capital seeking reasonable returns is in love again with the recovering hotel business . The issue for anxious buyers is a lack of appealing assets on the market . Some of the best deals seem to be getting done offmarket , leaving some of the less-connected players wondering how the rest of the year will stack up for deal making , and what asset classes offer the biggest upside .
With lenders helping so many owners hold on through the pandemic , those same owners now appear to be in no big rush to sell at any sort of discount as they see more upside potential in their assets . That leaves too many buyers either overpaying or on the sidelines .
HOTELS asked a few leading brokers for their take on the hotel M & A market . We broke it out by three asset classes – limited-service , big urban assets , and resort hotels – and asked the brokers to make a case for investing in each of these spaces .
Urban big boxes might offer more opportunities as it seems to suit well-capitalized investors with a sufficiently long-term investment horizon . Whereas other segments may be close to peak values , Stephen O ’ Connor and Douglas Hercher from RobertDouglas write that if business travel bounces back , those big boxes comparatively stand to offer outstanding returns on investment .
For efficient limited-service assets , higher net operating income can equal a better ROI as both an ongoing business and as a property type ready for disposition at the end of an economic cycle .
Contributor Burton Brooks of Mumford Company strongly believes the limited-service segment will continue to be a strong invest and hold strategy for owners in both the short and long term . With an expected ADR increase over the next few years , this segment allows owners to invest in an operation that will hedge against inflation and continue to deliver positive results .
The segment grabbing the biggest headlines is the resort segment , with per key deals sometimes coming in at US $ 2 million . There is nothing that the capital markets like better than a positive outlook , writes CBRE Hotels Kevin Mallory .
Add insatiable capital supplies and interest in the resort segment is sky high . “ The thirst from the capital markets allowed us to drive deep competition often going to multiple bidding rounds ,” he says . “ Simply put – the leverage pendulum had clearly swung heavy for the benefit of the seller .”
On the following pages , read the essays of these three contributors to gain insight into the upside for deals in select-service , urban big boxes and resorts .