Owners’ expectations of operators amplify amid surge

The Anaheim Sheraton Park Hotel

The Anaheim Sheraton Park Hotel near Disneyland, managed by Rim Hospitality.

The Anaheim Sheraton Park Hotel near Disneyland, managed by Rim Hospitality.

 

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Mark LeBlanc, SVP of development, Rim Hospitality Recent signings:

* Hotel Angeleno, Los Angeles
* Hotel Erwin, Venice Beach, Calif. 

HM: Identify the most important trend that influenced third-party management companies in 2013?
ML: First is the emergence of Chinese buyers. The primary targets for these buyers is the West Coast and New York, and given the low inventory in New York, we’ve seen a strong uptick in interest from Chinese buyers on the West Coast. The second trend is the increase in the amount of transactions in 2013. 

HM: What trends will affect third-party management companies in 2014?
ML: The expansion of and investment in existing ownership group’s portfolios. Given that hotel rates can be adjusted daily, hospitality becomes an attractive commercial real estate investment. 

HM: What are owners’ expectations for 2014? Will they change from 2013?
ML: There will be increased pressure on the bottom line, which we expect to mostly come from rates. The expectation in 2013 was that RevPAR would increase; in 2014, owners will be expecting to see GOP rise.

Radius Hospitality President Scott Yeager, left, with VP of sales and marketing Randy Budd, in front of the Fairfield Inn & Suites Somerset New Jersey.

Radius Hospitality President Scott Yeager, left, with VP of sales and marketing Randy Budd, in front of the Fairfield Inn & Suites Somerset New Jersey. 

 

HM: What chain scales do you expect to perform the best in 2014?
ML: The luxury segment will be very strong as a result of foreign travel and investments. Corporate and leisure business will also be more likely to book within the luxury category, especially when compared to the past few years when businesses were often encouraged not to book in the luxury resort category.

Randy Budd, VP of sales and marketing, Radius Hospitality Recent signings:
* Residence Inn Akron/Fairlawn, Ohio
* Cambria Suites South Windsor, Conn.

HM: Identify the most important trend that influenced third-party management companies in 2013?
RB: There is a significant amount of money on the sidelines from investors who want to put their money in real estate. These investors include capital funds, groups of investors and individual investors. The lending institutions are opening up in the right markets and for the right brands. Many investors are also looking at the third-party management company as a one-stop shop for finding the right location, brand if appropriate, architects, etc.

HM: What trends will affect third-party management companies in 2014?
RB: The lack of new supply in the last four years has benefitted hotels across the board from an occupancy standpoint. Occupancies have continued to rise since 2009, and with little or no new supply, ADRs have increased. These revenue gains and profitability are attracting banks back into the hospitality-lending arena and investors are anxious to participate.

Mark Sharkey, president of Remington Hotels, which manages the Pier House Resort & Spa Key West, a hotel Ashford Hospitality Trust acquired in May for around $90 million.

Mark Sharkey, president of Remington Hotels, which manages the Pier House Resort & Spa Key West, a hotel Ashford Hospitality Trust acquired in May for around $90 million. 

 

HM: What are your industry forecasts overall for 2014?
RB: We are forecasting a 5-percent to 8-percent increase in total revenues for most of our hotels. 

HM: What are owners’ expectations for 2014? Will they change from 2013?
RB: Owner’s expectations will be higher than ever from a financial standpoint in 2014. In 2013, profits became more consistent and a reality. In 2014, high profits will be expected. 

HM: What chain scales do you expect to perform the best in 2014?
RB: Midscale development will continue to grow at the highest pace because luxury and full service is still limited with fewer markets.  

Mark Sharkey, president, Remington Hotels Recent signings:
* Pier House Resort & Spa Key West
* Residence Inn Atlanta Buckhead

HM: What trends will affect third-party management companies in 2014?
MS: Revenue management and e-commerce. During the recession, our industry tended to book any business we could. As the economy continues to grow, we must commit to selling rooms on the nights, and at the rates, that make the most sense.

HM: What are your industry forecasts overall for 2014?
MS: Over the years, I’ve learned to stay away from projections, but we think 2014 presents a terrific mid-inning opportunity. With several years left in the current up-cycle, and new construction still at historic lows, we believe 2014 will be a sweet spot for owners and operators with stabilized product already on the ground.

Carlos Rodriguez, EVP of Driftwood Hospitality, which recently picked up management of the Hilton Cocoa Beach Oceanfront Resort in Florida.

Carlos Rodriguez, EVP of Driftwood Hospitality, which recently picked up management of the Hilton Cocoa Beach Oceanfront Resort in Florida.

 

HM: What are owner’s expectations for 2014? Will they change from 2013?
MS: Based on our view of the economy’s continued recovery, we think owners will expect higher revenues, higher RevPAR and accelerated margin growth. Given the significant dollars that continue to be pumped into capital improvements, I would expect some renovation holdover effect, but in general, 2014 promises to be a year of high expectations from ownership.

Carlos Rodriguez, EVP, Driftwood Hospitality Recent signings:
* Arenal Lodge, Fortuna de San Carlos, Costa Rica 
* Cambria Suites Miami Airport Blue Lagoon

HM: Identify the most important trend that influenced third-party management companies in 2013? 
CR: In 2013 we spent a lot of time and resources helping our clients either refinance and/or renovate their properties to meet current brand standards and update and refresh the look of our hotels. 
 
HM: What trends will affect third-party management companies in 2014?
CR: We are positioning ourselves to be ready to handle several new construction projects at a time, which is the next step in the evolution of this economic cycle as banks open up for this business once again. 
 
HM: What are your industry forecasts overall for 2014? 
CR: Supply will start growing at a faster pace as banks continue to relax their positions and start lending more to potential developers, especially now that the existing inventory of distressed deals in the hands of receivers has dwindled. 
 
HM: What are owners’ expectations for 2014? Will they change from 2013? 
CR: Overall, improvement in RevPAR across all segments of the market as the economy continues to slowly improve. You won’t see any big jumps in any segment since new supply will start to appear and the economy will improve, but at a slow pace.

Third-party managers are going to have to show their true worth in 2014, as owners' expectations have shifted from “understanding” during the rough economic patch to “stand and deliver” during this now-improved operating climate. Most in the industry are expecting nice gains in revenue per available room in 2014, primarily in the 6-percent to 8-percent range. Another factor fueling the resurgence: lack of new supply pumping up demand, occupancy and rates. These heady conditions have lured more investment in the industry, particularly from overseas wealth, private equity and real estate investment trusts, all vying for properties that no longer are selling at discount rates. Most industry insiders believe that 2014 will be a sweet spot for owners and operators, due in part to stabilized product already on the ground. 

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