Pictured: Brand executives, developers, managers and financiers shared trends at the annual Hunter Hotel Conference. From left: Geoff Ballotti, president and CEO of Wyndham Hotel Group; Todd Giannoble, managing director of Goldman Sachs; Jerome Cataldo, president and CEO of Hostmark Hospitality Corp.; Steve Joyce, president and CEO of Choice Hotels International and Suril Shah, head of North America hospitality acquisitions for Starwood Capital Group.
Atlanta – Development and brand executives at the annual Hunter Hotel Conference in March shared advice on how hoteliers can take advantage of a positive industry environment—and consumer travel trends influence most of their tips.
The underlying foundation is that pricing fundamentals are good, so owners and managers have a strong base from which to make their hotels even more attractive.
“Private equity [investors] are focused on existing product right now,” said Joel Eisemann, CDO of the Americas region for InterContinental Hotels Group. “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.”
Pictured: Leslie Ng, CIO of Interstate Hotels & Resorts; Don Landry, owner of Top Ten Hospitality Advisors; Joel Eisemann, CDO of the Americas region for InterContinental Hotels Group and Liam Brown, president, U.S. and Canada select service & extended stay lodging and owner & franchise services, the Americas for Marriott International.
Eisemann and Liam Brown, president of the U.S. and Canada select service & extended stay lodging and owner & franchise services, The Americas, for Marriott International, 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 to not 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, 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 full-service hotels have.”
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.”
How consumers behave when it comes to travel shopping was another part of the discussion. 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. You’ll always have the customers that shop at the OTAs, but we as an industry need to work to direct that high-paying, loyal customer to book more directly.”
Take Advantage of Good Times
Jerome Cataldo, president and CEO of Hostmark Hospitality Group, and Todd Giannoble, managing director of Goldman Sachs, stepped outside the lines of investment forecasts and said the time is now to shake up the norm a little bit.
“It’s time to innovate,” Cataldo said. “We’ve come out of survival mode and now the focus should not only be on transactions and finances, but also on next-gen products and services.”
Simmering below the surface is a measure of caution and an attitude of making hay while the sun shines.
Giannoble said brands are playing a big role in supporting this measured growth approach. “They see that supply will grow slower and be more methodological. You’ll see more adaptive re-use and you’ll see transformative capital going into old hotels to make them new again and that will mitigate supply,” he said.
Geoff Balloti, president and CEO of Wyndham Hotel Group, agreed with that forecast, saying new-build prototypes for brands keep properties fresh as the cycle continues. “One new-construction issue we see in the economy segments is that you have inventory going out of the cycle that isn’t being repositioned,” he said. “With that, new construction is coming in and that’s exciting.”
Steve Joyce, president and CEO of Choice Hotels International, cited Choice’s capital investment in its brand refreshes, particularly Comfort Inn [see full story starting on page 8], as an example of a measure to keep existing product fresh, even if it’s not new-build that adds supply. “Historically we’ve seen 2-percent supply growth, but we haven’t seen that lately since 2009,” he said. “I don’t want to get overly giddy about this environment, but I think it’s really good!”