HUNTER CONFERENCE |
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THINGS ARE GETTING FINANCED , IT ’ S JUST A BIT MORE EXPENSIVE |
– DAN PEEK , PRESIDENT AND
COO , HODGES WARD ELLIOTT
activity is not only growing but also diversifying . He said a vast majority of deals he saw had been sub- $ 50-million transactions in drive-to-leisure markets . Now , for instance , Peek said he is working on five deals in Washington , D . C ., with cities like Chicago and San Francisco stepping back into the spotlight . “ There is broader
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conviction from the equity side ,” he said .
Asset orientation has also evolved . Much of the deal and development activity in the course of the past several years has leaned into the midscale and select-service space . JLL ’ s Davis said that , historically , select service made up around 30 % of entire investment . Over the past years , that has changed , and has become the predominant asset class for activity . He said that in 2023 select-service hotels made up around 51 % of all investment , a function of the asset class becoming more institutionalized .
DEBT DRIVE Higher interest rates have increased the cost of capital and the cost of debt , but lenders aren ’ t just sitting passively on the sidelines waiting . “ Lenders want to do deals ,” said Hunter . “ People want to do deals , they just might not like the pricing .”
Added HWE ’ s Peek , “ Things are getting financed , it ’ s just a bit more expensive .”
Lenders are increasingly looking at hospitality as a
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well-performing asset class that , though still risky , has shown a resilience born out of the pandemic . “ We are seeing significant spread compression in the lending space ,” Davis said , adding that on the debt side , there has been a rally in both fixed and floating CMBS , with spreads in the high 100s . “ There is more liquidity getting in ,” Davis said .
Between the buying and selling of hotels is the operation of the asset itself , with owners more and more focused on the bottom line and profitability generation . The exponential growth in average daily rates that ensued in the post-COVID era was a boon to the top line and gave some cover to an increase in cost lines that were a function of inflation and supply chain challenges . “ Can ’ t do that anymore ,” Hunter said , adding that variables like property taxes , insurance and labor were all higher . “ Margin compression is a real thing ,” he said . “ Operations are getting harder and a good operator sets itself from the pack .”
Operators , Peek said , are becoming more sophisticated
WE ARE NOT GOING BACK TO 4 % MONEY — IT ’ S NOT HAPPENING
– TEAGUE HUNTER , PRESIDENT
AND CEO , HUNTER HOTEL
ADVISORS
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THANK GOD WE ARE NOT IN THE OFFICE SPACE
– EVAN WEISS , COO AND
PRINCIPAL , LW HOSPITALITY
ADVISORS
and doing more with less . He said the impact from technology like AI will heavily impact and help revenue management . At JLL , AI is being used for its predictive capabilities “ to see who will be a buyer or a seller ,” Davis said .
To a man , panelists agreed that it was a great time to invest in the hotel space , even in the face of geo-political conflict . “ It can be a high-risk , high-return business ,” Davis said . “ The talent is in sorting through the noise and identifying the deals that make sense ,” he said .
Or , as Grice jokingly said , “ Just get with Taylor Swift ’ s team and find out where she is going next ,” adding , in all seriousness , “ The smart money is starting to make bets .”
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22 hotelsmag . com May / June 2024 |