Franklin, Tenn.-based Chartwell Hospitality is a hotel operating company that specializes in the acquisition, development and management of branded limited- and full-service hotels. To date, the company operates 37 hotels across 12 states. Seven hotels are under development, three of which are full-service properties.
Jon Benowitz, Chartwell’s VP of capital strategy and investments, said the company—which has assets, excluding hotels under development, totaling more than $1 billion—focuses on the Hilton and Marriott International families. Additionally, he says Chartwell specializes in building hotels as parts of large mixed-use projects, benefitting from new demand generators coming on line in tandem with the hotels.
Hotel Management recently connected with Benowitz to get his take on what types of investments to look for, where he thinks the acquisition market is headed and more.
1. When it comes to investment, what does Chartwell look for in a hotel?
Benowitz: We always keep in mind our end goal, to create significant value for our owners and investors by generating strong current cash returns and capital gains through unique, premium-branded assets. Before investing, Chartwell closely analyzes all relevant aspects of the business climate to assess how the hotel, market and relevant demand drivers will perform in the future. By understanding key market factors and the competition, we can take advantage of gaps in the market and introduce a new or better product or enhance an existing property.
We look for markets that have growing demand generators for both weekdays and weekends, and properties where we can make a difference. Is there opportunity that was left on the table? Can we drive more revenue, market share and profit to this asset through operational changes? Are there capital improvements or possibly a rebranding that will drive profits and [return on investment]? If we can improve the performance while riding an uptick in the market, it could be a big win for us.
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2. What does the portfolio makeup look like for Chartwell?
Benowitz: Of the 37 hotels in our current operating portfolio, Chartwell owns and operates 11 and operates 26 for third-party owners.
At one point, Chartwell had ownership in all of its hotels. As we sold hotels, we continued to manage those assets for the buyers, including companies like Apple REIT, Capstone Development and Rockbridge, and this has led to follow-up deals with these owners. We’ve built a solid foundation and infrastructure for hotel management and we’ll look to grow on a selective basis where our goals and values are aligned with ownership.
Regardless of portfolio makeup, we have an owner’s mentality and manage all hotels as if they were our own.
3. Describe an exciting development that’s underway. What gets you excited about it, and why will it be an essential addition to your portfolio?
Benowitz: Chartwell is developing a Hampton Inn & Suites in Nashville’s Capitol View development, which, in addition to the hotel, will house more than 1.1 million square feet of Class-A office space, 130,000 square feet of retail and restaurant space, 600 multifamily residential units and a 2.5-acre urban activity park connected to Nashville’s greenway system.
The hotel, a joint venture with Rockbridge, will feature an expansive glass lobby with high ceilings and 4,000 square feet of prominent meeting space overlooking the dynamic and vibrant Capitol View urban streetscape. The building will also offer a rooftop pool and gym with sweeping views of the downtown Nashville skyline and historic state capitol building.
Demand for this type of live-work-play environment is on the rise in the U.S., especially in dense urban areas, and we are excited to expand this segment of our portfolio. This project is also indicative of our investment strategy, to build or buy premium-branded hotels with unique or enhanced features in markets with multiple demand generators.
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4. What does the current state of the hotel-acquisition market look like? What do you think it will look like over the next five years?
Benowitz: While the volume of activity and availability of assets fluctuates, there always seems to be a healthy flow of acquisition opportunities—and we expect this to continue. Revenue-per-available-room growth nationwide may not be as strong as it’s been over the last five years, but growth will generally be stable and solid. Specific markets and opportunities will stand out. With substantial capital continuing to flow to the hotel industry, acquisitions will remain competitive. If you’re not prepared to move quickly, the opportunity might be lost. We think there will be ample opportunity for us to pursue acquisitions going forward.
5. Looking ahead, what’s next for the company when it comes to investment and development? What challenges and opportunities do you see?
Benowitz: We plan to grow Chartwell’s portfolio opportunistically and at a controlled pace through development, acquisitions and selective third-party management—all areas that we believe will offer long-term value.
We’ll continue to explore opportunities where Chartwell can create value, specifically by developing or acquiring assets with competitive advantages that differentiate them from the competition. We’ll remain active in the select-service arena but will also continue our recent direction into efficient and uniquely designed full-service hotels with distinctive qualities.
The hotel industry is always challenging, which is why we like it. At the moment, expense control is something we’re very focused on, especially with the tightening of the labor markets. We’ll continue to stress hiring the right people and taking great care of them by providing training and opportunity while employing good systems to keep operating expenses in line.