2013: Will it be a turning point for lodging transactions? Experts say yes

As the lodging investment landscape continues to evolve, 2013 is certainly shaping up to be the year when transactions finally start to sustain momentum. 

I hear many comments during my travels about the challenges of financing or obtaining the “right financing.” Meanwhile, there appears to be a strong bench of buyers interested in acquiring assets in this very conducive investment climate.

At a recent industry conference, I met up with Rich Conti, president of The Plasencia Group, a hotel investment and consulting firm specializing in hotel transactions. Rich has been involved in billions of dollars of transactions and financings throughout his career. He formerly was president of Boykin Lodging Company, a NYSE-listed lodging real estate investment trust, and a principal and director with Coopers & Lybrand’s National Hospitality Consulting Practice. 

We discussed how the financial models of today differ from years past. He said financial models remain the same for the hotel industry but parameters for acquisition have changed. While most sophisticated investors still use internal rates of return (IRR) and net present value (NPV) to calculate values, the IRR target has dropped to between 16 and 18 percent from 2007-08, when it was 20 percent. In addition, discount rates in NPVs have also dropped in purchasers’ underwriting, which means higher pricing for transactions.

This is no surprise since interest rates remain low now and for the near term, revenue per available room is expected to grow for the next few years, there is limited new supply of hotels in the pipeline and there are relatively few high-quality assets on the market today. Accordingly, it appears to be a seller’s market.

Conti predicted that REIT acquisition activity, which declined between 2011 and 2012, is expected to pick up again this year. This will cause more competition for properties in the major markets, again resulting in higher prices. Many private-equity sources therefore have targeted secondary markets that may have less competition for an asset. Many of those markets are still showing steady RevPAR and net operating income growth. Transaction volume is expected to be up between 5 and 10 percent over 2012.

He said companies that have been accumulating portfolios of assets, mostly select-service, can be expected to go public as an exit strategy this year. 

While predictive indexes remain positive, I’m sure many hoteliers have questions about what lies ahead. Hoteliers looking for answers would benefit by attending strategic investment and deal-making forums around the globe, notably the IHIF Summit Series, which provides opportunities to learn more about available financing and prospective growth markets.

The series’ flagship event, the International Hotel Investment Forum, celebrated its 16th anniversary this month in Berlin with about 1,700 top-tier professionals from 60 countries participating. 

With events in Brazil, North America, Russia, Asia and Turkey, the IHIF Summit Series provides the perfect venues to learn about critical investment trends in every region of the world. 

The next event is the Asia Pacific Hotel Investment Conference, or APHIC, to be held May 15-16 in Bangkok, Thailand, at the Dusit Thani Bangkok, followed by the Turkey & Neighbors Hotel Investment Conference in Istanbul, May 29-30, and the Brasil Hospitality Investment Conference, June 13-14, in Sao Paulo. For more information on the IHIF Summit series, visit www.ihif.com. 

BHIC advisory board plans June’s Brazil investment event 

Planning for Brazil: The advisory board to the Brasil Hospitality Investment Conference gathered to plan programming for this year’s event, taking place June 13-14 at the Tivoli Mofarrej in Sao Paulo.

Edgar Garin, director of development for Latin America, La Quinta; Rogério Miranda, SVP acquisitions - Brazil, Host Hotels & Resorts; João Auada, director of business development, Tecnisa; Rajiv Trivedi, EVP of franchising, La Quinta; José Ernesto Marino, chairman of the advisory board and founder, BSH International; Chelsea Patriquin, conference manager, Questex Hospitality + Travel; Mariana Aldrigui, professor, Universidade de São Paulo; Fernando Martinelli, director of development, Interval International; José Barquero Flores, director of development, NH Hoteles; Michael Schnurle, director, Horwath HTL; Abel Castro, SVP of development, Accor; and Rodrigo Machado, CEO, XP Investimentos.

IHIF Calendar

* Asia Pacific Hotel Investment Conference (APHIC)

May 15-16, 2013

Bangkok, Thailand

IHIF.Questex.Events.net

* Turkey & Neighbours Hotel Investment Conference (CATHIC)

May 29-30, 2013

Istanbul, Turkey

CATHIC.com

In association with Bench Events

* Brasil Hospitality Investment Conference (BHIC)

June 13-14, 2013

Sao Paulo, Brazil

IHIFBrasil.com

* Asia Pacific Tourism Destination Investment Conference (APTDI)

September 3-4, 2013

Singapore

TDIAsia.QuestexEvents.net

* International Hotel Investment Forum 

(IHIF Berlin)

March 3-5, 2014

Berlin, Germany

berlinconference.com

In association with Bench Events

* Russia & CIS Hotel Investment Conference (RHIC)

Check website for date

Moscow, Russia

russia-cisconference.com

In association with Bench Events

* North America Hotel & Tourism Investment Conference (NATHIC)

Check website for date

Washington, D.C., USA

NATHIC.com