aggressive stance to develop and acquire hotel assets in the U . S and Europe , Tarpey says M Development first looked more broadly at Jackson Hole as a market , as well as the ongoing wealth creation taking place there . Generally , when researching development opportunities , they also tend to look at residential home sales , as well as where people relocated during COVID , realizing these markets are getting harder to build in , not easier .
“ We spent a lot of time looking at replacement cost and how hard it would be to recreate a hotel like Amangani . And we recognized there was definitely an arbitrage between the time spent building a new asset there and the cost of acquisition . We ’ ll use that model in select markets , whether it be in Napa Valley , South Florida , etc . But really , the thesis is high barrier to entry markets , and we will continue to look aggressively at hotels like this .” M Development ’ s acquisition of Amangani , which it plans to enhance with a significant renovation , was its first in the hotel space as historically the group tended to focus on High Street retail and residential in high barrier to entry markets like Aspen , Palm Beach and Naples , Florida . While further luxury
AS AN INDUSTRY , WE NEED TO BE A LITTLE CAUTIOUS NOT GET TOO AHEAD OF OURSELVES WITH EXPENSIVE FINANCING JUST TO CLOSE A TRANSACTION AND KEEP OUR DEVELOPMENT TEAMS WORKING .
– BRANDON TARPEY
hotel acquisitions are part of the growth plan , Tarpey does see new development as a way forward , as well .
“ We see development as a key strength of our business and going forward , I think there ’ s going to be a lot of opportunity there ,” he says . “ We ’ re starting to reach back out to the brokerage community and let them know what we ’ re looking for . We ’ ll be very selective in what we acquire , and we do have a few things we ’ re looking at right now .”
M Development is looking in the United States and Europe for assets and Tarpey says it will partner with family offices as long-term , generational holders of assets . In fact , Tarpey says its relationship with Canyon Group and its founder Homi Vazifdar , sellers of Amangani , is what sealed the deal . He adds that he hopes to work with Canyon again . “ They have great deal flow . We like their team quite a bit and we have the ability to transact with friends ,” Tarpey adds .
STATE OF THE BUSINESS When asked for his take on the state of the hotel business , Tarpey says Europe is now seeing the rebound in the resort space that the United States saw last year .
“ Year-over-year , however , I think most of the leisure markets are a little bit down with interest rates rising and a pending recession , if we ’ re not in a recession … I think we ’ ll see a pullback in discretionary spending , and we ’ ve seen companies already starting to pull back corporate travel expenses .”
Overall , Tarpey believes the state of the economy may temper the market a little bit . “ It ’ s really tough to finance deals right now . So , if you need to have the financing to close a deal , or if you ’ re strictly cash-oncash driven , buying a traditional limited-service hotel and trying to yield the 12 % or 13 % cash-on-cash , you need a real heavy price discount to be able to move forward … So , I think we ’ ll see deals being repriced and some of the institutions putting a pause on acquisitions … We ’ ll see a small- to medium-price reduction , and then prices will level off .”
Tarpey says everyone should be a little cautious on prices [ not necessarily jump on a 5 % reduction ] and “ let the market come back where it needs to be .”
“ As an industry , we need to be a little cautious not get too ahead of ourselves with expensive financing just to close a transaction and keep our development teams working ,” he suggests .
Tarpey also thinks the brands need to step up their game , as well , and provide guests what they deserve . “ I think they ’ re going to start having real problems . I don ’ t think we can rely on the COVID boom anymore and we have to get back to the norm of providing services and value … If brands don ’ t start fulfilling their promises , they ’ re going to start losing a lot of steam .”
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