New development, not acquisitions, penetrates talk at Hunter Conference

ATLANTA--The strong performance of the hotel industry continues to show no let up, but as asset values surge, investors are shifting their attention away from acquisitions in favor of ground-up development.

This was one of the takeaways from the first day of the Hunter Hotel Conference here at the Marriott Marquis.

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Regardless of one's position in the industry, now is a "great time to buy, sell or renovate," Bob Hunter, CEO of Hunter Hotel Advisors, told the audience. "The time is now," he continued. "Pull the trigger. Lenders are active and buyers are paying top dollar."

And as they do, asset values continue to creep up, prompting Raj Trivedi, EVP and CDO of La Quinta Inns & Suites, to say that, "What's changing is finally is we are at the point where acquisition cost are higher than replacement and new development will take place."

"Bigger projects are getting done," said Liam Brown, president, U.S. and Canada select-service and extended-stay lodging and owner and franchise services, Marriott International. "A few years ago you never heard of full service getting done. There is also an abundance of financing for the upper-midscale segment." 

Trivedi and Brown were commenting during the conference's "Leadership & Experience" panel led by Dan Landry, of Top Ten Hospitality Advisors, who peppered the panel with myriad questions.

One of which dealt with many states implementing hikes in the minimum wage requirement. All the panelists, Pratik Patel, principal, REM Hospitality; Javier Rosenberg, COO, Americas and EVP managed hotels, Carlson Rezidor Hotel Group; and the aforementioned Trivedi and Brown, agreed that there needed to be better support for industry lobby groups, such as the AH&LA. 

Fortunately, increased revenues and rate growth are helping cover costs, commented Patel. "RevPAR growth can mitigate some of those costs, but more than ever we need to support lobby groups," said Rosenberg.

Brands and Distribution
With top brands on the panel, discussion moved to brands: what their benefits are to owners, brand proliferation and how they reach customers during the booking process.

While the value of loyalty programs is still high, Trivedi said, the evolution of the OTAs continues. "Personalized marketing will change," Trivedi added. "Brands have to focus on the owners bottom line. How to save on expenses. We are good on the top line."

While Landry commented on the growth of new brands, Patel said demand for them was present and, in any case, they are being "launched in top 20 markets," he said. "A need is being filled and they stay corralled in high-demand markets. The brands see some demand not being filled."

He cautioned that it did need to be controlled, so as to not be an issue of cannibalization at some point. 

"There is customer demand for it and it offers new development opportunity for investors," Rosenberg said about new brands. Added Brown, "If we don’t have compelling brands, they won't build and buy them."

Meanwhile La Quinta's Trivedi said the company remains committed to one brand, for now. "The established brands perform at the highest level. They are in touch with the market," he said. "We are a single brand by design. When you have multiple brands, you are going to cut the piece of the pie into smaller pieces."

In a last word, Marriott's Brown reiterated his rosy outlook for the industry. "We are at historic occupancies," he said. "There is the opportunity to drive rate. And despite OTAs, we own the stay."