Multiunit hotel operators and developers across the country have had a largely successful 2016 and are looking forward to continued momentum throughout next year. Revenue per available room growth is strong and transaction volume continues to grow as multiunit owners and operators move forward with new projects.
Russ Shattan, MCR Development’s SVP of acquisitions and development, said the industry has been in the arc of a 6.5-year cycle, since the beginning of 2010, where RevPAR growth was slow, transaction volume was not as robust as in years past and bank lending was tight. But according to Shattan, things started to show signs of change toward the end of 2015.
“2016 has been an encouraging year for our firm,” Shattan said.
MCR Development owns and operates properties in 23 states from Yuma, Ariz., to Long Island, N.Y. The company has dual headquarters in Dallas and New York City.
The company broke ground in August on a 500-room hotel project at John F. Kennedy Airport in New York, and is under contract to purchase another property by October. It also sold six hotels in the month of August, Shattan said. Additionally, the company is poised to open a Marriott Residence Inn in Fort Lauderdale, Fla., in February that was a ground-up development.
“We’re really excited about all of the growth in this industry right now,” Shattan said. “From an acquisition standpoint, I think 2017 will be even more encouraging.”
He attributes the positive growth to major economic trends holding up, such as job growth.
Regional Focus
Certain areas of the country are starting to show sluggish growth and development, including New York City. That market has been saturated, several multiunit hotel owner/operators said. Houston and Pittsburgh are also growing stagnant when it comes to multiunit properties due to declines in the gas and energy markets.
The past two years saw expansion for The DelMonte Hotel Group, which is based in Rochester, N.Y., said Alex DelMonte, president of the company.
One of the oldest Marriott franchisees, DHG opened a 136-room Hilton Garden Inn in 2015 within a 15-acre mixed-use development adjacent to the University of Rochester (N.Y.) Medical Center.
In 2016, DHG opened a second HGI in Pittsburgh. This represents the company’s first hotel outside of New York state, DelMonte said.
The company owns and operates 14 hotels totaling 1,353 rooms in two states and seven cities. In addition, it has five projects in development. The company signed its first third-party management agreement for a 135-room Courtyard by Marriott to be constructed in Troy, N.Y., with an anticipated opening in early 2018.
Apple Hospitality REIT merged with Apple REIT Ten in September and now has 236 hotels across 96 metropolitan statistical areas throughout 33 states, said Krissy Gathright, EVP and COO of Apple Hospitality REIT.
“We believe there is opportunity for continued improvement across the majority of our markets as the overall economy is expected to continue to grow, albeit at a modest pace,” Gathright said. “Some of the opportunities and challenges that we have seen and that we anticipate may impact the lodging industry over the next year to 18 months include slow [gross domestic product] growth, which could lead to pockets of demand weakness which in certain markets is compounded by supply increases.”
Market Types
But Gathright said some of the growth in the overall industry this year can be attributed to non-gateway city markets like Boise, Idaho; Charlotte, N.C.; Dallas; Phoenix; and Tucson, Ariz., which have seen solid growth from new businesses and residents attracted to the relatively lower cost of living, attractive amenities and business-friendly environments, creating greater lodging demand.
The strong growth has allowed DHG to refocus its footprint into more urban markets, DelMonte said.
“We are currently focusing on development projects with high barriers to entry. We believe that the future traveler wants an urban experience no matter where they are staying,” he said. “As a result, we are focused on lifestyle centers in which our guests can walk out of the door and have all of the amenities they would expect in an urban location available to them.
“DHG is also a believer in the new lifestyle brands such as AC, Moxy and Canopy. These brands present a great opportunity for development in the future.”