OWNERS SEEKING SAFETY IN NUMBERS , BARGAIN-HUNTING OPPORTUNISTS , CONSUMER BEHAVIOR CHANGES CONTINUE TO DRIVE DEMAND FOR CONVERSIONS .
Contributed by MEGAN ROWE
In December 2021 , Curio Collection by Hilton launched the Wasserturm Hotel Cologne , housed in what was once the tallest water tower in Europe . Owned by Germany ’ s Aroundtown , the space has 88 guest rooms and suites .
For investors , developers and owners , the math is compelling . “ When you look at the conversion model … you are able to ascertain the cost much easier than you can with new construction ,” says Tom Nee , senior vice president with Choice Hotels International , Rockville , Maryland . “ It ’ s a lot easier to find a project that ’ s open and operating to estimate costs . From the day you invest , you have a revenue stream .”
LOOKING FOR UPSIDE Approaches to conversions vary widely , depending on investors ’ and operators ’ priorities .
EOS Investors , for example , blossomed from one hotel , the Hamilton in Washington D . C ., to 41 by the end of 2021 , mainly by snapping up existing assets , especially independents , mostly in secondary markets along the U . S . east coast . “ Where we have continued to be most active are markets with little to no new construction and demand driven primarily by leisure ,” says EOS Managing Director Tom Burns , who is banking on leisure guests driving demand for the foreseeable future , especially in well-established destinations .
That doesn ’ t mean the company isn ’ t dismissing urban locations in anticipation of a rebound in event and business travel . “ We ’ re active in evaluating major markets … but we ’ re not seeing a lot of sellers interested in selling ,” Burns adds .
Mission Hill Hospitality , a Denverbased property company from KSL Capital Partners , specializing in select-service and extendedstay , bought 13 hotels in 2021 . CEO Greg Kennealey expects 2022 to deals to accelerate , focusing on undercapitalized or undermanaged properties that need some TLC or new management . Other prized qualities include location , diverse demand drivers and some competitive advantage — prime spot , newest asset in the market , limitations on new development nearby .
Pebblebrook Hotel Trust , Bethesda , Maryland , values properties with a back story . “ We think the opportunity continues to be a major one , because people like things that are unique , different , experiential ,” says CEO Jon Bortz . Pebblebrook ’ s portfolio includes The Liberty in Boston , originally a jail ; Hotel Monaco in Washington D . C ., built as a post office ; and Jekyll Island Club Resort in Georgia , once a private hunting club for wealthy families . Of that last property , Bortz says , “ There ’ s a huge opportunity to reposition it to a 4- to 5-star level , bring it back and amplify the history and uniqueness of it .” He says renewing the resort will likely involve an investment of about US $ 20 million , or about US $ 100,000 a key .
Bortz also likes land . “ If a property has land , it gives you more opportunities to add amenities ,” he reasons . Skamania Lodge in Columbia River Gorge , Washington , sits on a large parcel once dominated by a golf course . The company downsized and redesigned the golf course and added a zipline course , hiking trail , outdoor pavilion , treehouses and an axe-throwing
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