Development executives from Marriott International, IHG and Interstate Hotels & Resorts kicked off the first day of the Hunter Hotel Conference with insights into a range of topics including buying vs. building, investor interest and how consumer preference is influencing development.
But the most frank conversation centered around strategies hotel buyers and sellers can implement now to take advantage of financing and market strength while times are good.
"Private equity [investors] are focused on existing product right now," said Joel Eisemann, CDO of the Americas region for IHG. "At some point the price to buy is higher than the cost to build, but right now you'll get the best pricing on existing hotels. A lot of [owner/franchisees] are selling assets to private equity and using that cash to build new product."
Eisemann and Liam Brown, president of the U.S. and Canada select service & extended stay lodging and owner & franchise services, The Americas, for Marriott, agreed that buyers clearly are looking ahead to their exit strategies, and institutional-quality assets with strong brands will sell easier down the road.
On the real estate investment trusts front, panelists said we shouldn't expect lodging REITs to continue trading at the lower end of REIT classes. "In the mid to late 1990s, hotel REITs were trading at the highest side of the industry," said Leslie Ng, CIO of Interstate Hotels & Resorts. "I think we'll see hotel REITs pay higher dividends over the next 12-20 months."
As the panel discussion shifted to consumer preference, the topic of relevancy for full-service hotels in today's lodging industry sparked debate.
Eisemann pointed out that "the meetings business is still huge, and that's what upscale flull-service hotels have. There are groups that always will have need for the full F&B that select-service just can't provide."
Brown agreed, and added that the key to full-service success is identifying markets where they add benefits and thrive. "That's in urban or resort locations," he said. "To be a suburban full-service hotel today is a challenge."
On the select-service side, Brown said it's up to companies to determine how particular brands serve particular consumer preferences. "We always think in terms of the definitions of 'full-service' or 'select-service,' but what we offer and how we deliver has changed. If you look at at Courtyard by Marriott today, it's not the same as it was 25 years ago."
How consumers behave when it comes to travel shopping is another part of this discussion, the panelists said. All agreed that online travel companies continue to be valuable distribution channels, but hotel companies need to work to redirect some of that traffic to better benefit the hotel.
"It's a big challenge," Ng said. "We need to redirect the high-paying customers to brand.com booking or better sales efforts on our part. You'll always have the customers that shop the OTAs, but we as an industry need to work to direct that high-paying, loyal customer to book more directly."
Stay tuned for continuing coverage from the Hunter Hotel Conference this week. Follow Editor in Chief Stephanie Ricca on Twitter @HWN_Steph for up-to-the-minute news.