Wall Street investors have been patient the past few years, not tackling many hotel-related deals, but at the Hunter Hotel Investment Conference last week in Atlanta, those investors said they are ready to get back into the game.
During the "Wall Street Talks" panel, Mit Shah, founder and CEO of Noble Investment Group; Scott Trebilco, senior managing director of Blackstone; and Shai Zelering, managing partner, real estate at Brookfield, shared how hotel transactions were insubstantial last year.
Trebilco said his company hasn't acquired any hotels in the past two years but the company is prepared to be more active in the market this year.
“The cost of capital is a challenge," he said. "The cost of debt has elevated and has constrained leverage." Companies like Blackstone typically take on high debt loads to pull deals off, but when debt becomes more expensive, it makes it harder for them to pull the trigger. He added that unlevered internal rate of returns have increased.
Blackstone has about $25 billion invested in U.S. hospitality assets, excluding its gaming business. Trebilco said Blackstone would like to be more active this year, buying between $4 billion and $5 billion worth of hotel acquisitions in 2024. Blackstone is focused on reinvesting about $2 billion into its existing hotel portfolio, including the Hotel Del Coronado and Grand Wailea Resort.
Zelering said his company, which owns, operates and develops real estate assets including hotels, has about $22 billion invested globally. About half of that is in the U.S.
Zelering said this year "will be an active year" for Brookfield. "I think we will probably sell about $1.5 billion to $2 billion and buy [that same] amount hopefully," he said.
Noble Investment Group has just shy of $4 billion invested in hotel assets and has acquired $2 billion in assets over the past 20 months. "As we think about buying and selling over the next year to keep in line with what we've done over the last few years, that will probably be our normal cadence," Shah said.
Shah sees a wave of PIPs coming. “Brands are trying to figure out how to get hotels renovated,” he said. But are brands and owners aligned? Brands need the units and the tough credit markets have all but depleted some FF&E reserves, Zelering said. “There are transactions driven by the condition of the asset and debt levels,” he said.