The hospitality industry is one of the most solvent and fluctuating industries, dealing with transient customer groups on a daily basis. With this type of climate being prevalent in the hotel industry, there are numerous lucrative reasons why you would want to invest in hotel properties. Here are the key variables you need to take into account when planning your investment.
Private equity (PE) transactions hit their highest levels since 2007 in the US and Europe in the first nine months of the year, according to the Financial Times citing data from Thomson Reuters, with the value of deals amounting to some 212 billion dollars, partly on cheap debt.
Capitalisation rates for fixed income prime hotel investments such as lease contracts have reached sub 5%, according to a report from property experts HVS Hodges Ward Elliott. The number of investors buying into leased hotels has also trebled since 2009 as the asset class has become an increasingly attractive investment target for institutional investors. While the likes of Marriott, Hilton, IHG and Accor have moved away from lease contracts in the past, operators such as Deutsche Hospitality (formerly Steigenberger), Mövenpick Hotels & Resorts and Dalata Hotel Group are continuing to opt for lease deals. Leases remain an attractive operating format in Europe for many brands, particularly in the budget sector with operators such as Premier Inn in the UK or Motel One in Germany most commonly seen to sign lease contracts due to their low risk operating model enabling them to take on long-term, index-linked fixed leases, commented report author Peter Szabo, associate at HVS HWE. They are an effective way to separate the risk associated with hotel operations and real estate ownership - and the new-found popularity of leases now makes commercial sense for both developers and long-term owners, particularly in this economic cycle. In addition a number of more upscale operators such as CitizenM and 25hours hotels, perhaps with a long-term view of expanding into management contracts, are increasingly taking on leases as a way to initially prove their concept. The report details that the current economy supports fixed-income hotel investments, so there has never been a better time for investors and developers to sign lease contracts. Not only are hotels with leases particularly attractive to institutional investors, they provide a low exit risk for developers. The re-emergence of hotel leases is also likely to lead investors to considering alternative lease-based investments such as those outside the budget sector or turnover-based rent structures as well as the emergence of permutations such as sandwich and ground leases. Operators' willingness to commit to long-term indexed lease agreements and investors' readiness to buy as well as forward-fund hotel projects has enabled the fixed-income hotel market to become far more commoditised in this cycle than ever before, added Szabo. While hotels being accepted as an asset class of their own has benefited the hotel industry, investors and developers should keep in mind that hotels are ultimately trading assets and well-timed investment decisions must be supported by professional advice when it comes to lease term negotiations, rent coverage and the hotel's income generating ability. Download a copy of the full report here www.hvs.com.
One aspect I have been focusing on lately is the operator search and contract negotiations. We prioritise this process to ensure that we get the best fit for each property and that we achieve the highest yield for our investors. Dubai is one of the world's most attractive markets for international hotel operators, with a huge number of properties in the pipeline and countless opportunities for these firms to expand their brand presence.
If you are considering a management company because you feel you are not keeping up with the nuances of distribution channel management, human resource management, digital marketing, accounting and the changes in the industry that have driven us from art to science like revenue management, you are not alone.
Public sector involvement in convention center hotel projects is common due to the high cost of development and lack of private capital for such investments. Event planners expect the presence of a hotel adjacent to a convention center. Consequently, proximate hotels are essential for many convention centers to remain competitive in the convention center industry. As most communities desire the economic impact of group events and the spending of the visitors they attract, many are providing public subsidies to projects that are not feasible on a purely private basis.
It's no secret — the process of building out your 2018 business plan and marketing strategy can, more often than not, feel like gambling. Are you going to wager all your chips (marketing dollars) on black or red, odd or even? Should you make a high bet, or an inside bet? What happens if your bet is a bust? Did you just gamble away the potential success of your business or product?
So, you've got some cash to invest in your hotel and really want to make sure you get the biggest return possible – but where do you start? If you're operating with limited funds to invest but have big plans it can be tricky to know which updates will have the biggest impact on your reservations and there are so many different aspects that will influence it.
Independent and boutique hotels have a number of advantages over their chain competitors, of which owners can take advantage to achieve greater success. At Xotels we love independent boutique or innovative concept hotels, because the allow us drive premium results. So, what are these characteristics of independent hotels that provide unique selling points over the chain or franchise hotel variety?
The fourth quarter of every year is undoubtedly the busiest time of the year for all hotel stakeholders including operators, owners, and asset managers. The concerned parties will review, analyze and approve budgets for the following year. Challenges during the budgeting process will arise because they directly affect the operator's performance clause. As owners' representatives, it is imperative for asset managers to revise and challenge processes, but also motivate the operator to work diligently to generate the optimum and realistic returns for the following year, taking into consideration past performance and external market conditions.
It's no secret that the timeshare industry has witnessed its fair share of change over the last few years, especially with all the consolidation and spin-offs. Just recently, Wyndham Worldwide (NYSE: WYN) announced it will be mirroring the actions of Marriot and Hilton and will be spinning off its vacation ownership division, ultimately resulting in two publicly traded companies.
What makes some hotels more successful than others? It is true that the selection of a site, market, brand, and management team are crucial to the success of a property. But after many years at HVS in the Consulting & Valuation division, and hundreds of consulting assignments later, I contemplated the question, "Aside from these things, what really makes some hotels work?" In this article, I share what I believe to be some of the most important factors that must be considered in the acquisition or development of a hotel, which ultimately lead to a property's financeability, profitability, and long-term success. I have focused on owners, developers, or hospitality teams that consistently outperform the market with their acquisition or development projects, and have set to distill their priorities into an easy-to-understand summary. While some of the points below may not be anything new to some, it is important to keep in mind that it is the fact that these are considered a priority, not an afterthought, that leads to the success of hospitality projects.
Innovations form a significant backbone to an organization's ability to secure a competitive advantage. While historically we attribute much of that innovation potential to product, process or service innovations, a study conducted by KPMG in 2015 revealed that three out of four executives believe their company's future competitive advantage would be challenged by a competitor's business model innovations (BMIs).
French commercial leases and contract law governing hotels, hotel residences, tourist residences and restaurants constitute essential legal and economic stakes. In this sense, the 2014 Pinel Law represents a major legislative change for landlords and tenants.
Coke or Pepsi? Stripes or Solids? Apple or Android? Ohhh, the agonizing decisions we humans are forced to make on a daily basis! What if I told you that choosing between a fixed-rate loan and a floating-rate loan could make or break an otherwise successful real estate investment? Given how often this topic arises and how long the deliberation can last, I will guess that most real estate professionals reading this article would agree with the above statement. Below is a primer on the difference between fixed-rate loans and floating-rate loans and the pros and cons of each option.
Organizations we work in are much more than structures of mortar, glass and steel. They are actually living things that breathe, inhale and exhale energy and embody characteristics and emotions mirroring all of us who come in and work here.
For many people starting their own hotel or bed and breakfast is like a dream. Most are drawn by the charm of hospitality and see it as a chance to start fresh. However opening a hotel, just like any new business, is more difficult than it might seem at first sight.
For the past seven years, hotel capitalization rates (cap rates) have generally declined, according to investor surveys. The last time hotel cap rates increased for consecutive survey periods was in 2008, as the investment community realized the U.S. economy was in the early stages of a severe economic recession. From 2008 through early 2010, hotel cap rates jumped roughly 150 to 250 basis points, depending on which survey and hotel chain scale you observed. Since then, hotel cap rates have declined roughly 200 to 300 basis points, according to the same surveys.
The role of the appointed asset manager is undeniably valuable for owners' whose properties are under the operation of a management company. The asset manager acts on behalf of the owners' interests with a core objective to optimize value and. Therefore, it is important for hotel asset management companies to remain aware of new skill sets and to be equipped with innovative practices to protect the objectives of owners. For this reason, we have been motivated to identify practices for hotel asset managers to leverage their owners' returns.
For well over a decade, the members of the hotel industry's preeminent think tank, "LIIC – The Lodging Industry Investment Council," are annually surveyed to develop a list of the major hotel investment opportunities and challenges for the coming year. This exhaustive survey results in the LIIC Top Ten; a highly regarded profile of investment sentiment and attitudes for the lodging industry for the forthcoming 12 months. Altogether, the members of LIIC represent direct acquisition and disposition control of well over $40 billion of lodging real estate.