Hotels are awesome. I love ’em – and not just for the occasional vacation. I’m heavily involved on the capital side of the business, so I could not pass up the opportunity to get a hospitality update from three heavyweights in the sector.
Bo Ashbel of Aztec Group, Inc., Robert Finvarb of The Robert Finvarb Companies, and Don Weidenfeld of Magnum Energy Solutions joined me for a full-blown hospitality industry analysis.
“It almost doesn’t matter what segment you’re playing in and what market you’re located in. We happen to be involved in two of the hotter markets – South Florida and New York – and it’s just a larger universe of players in the market,” Finvarb said of the frothy market segment.
“The acceptance of hotels in the overall real estate market is much higher than it’s ever been – on par with retail, apartments, industrial.”
We covered the waterfront – so to speak – and here are some highlights:
– Select service hotels are attracting institutional investors.
– In Florida, there’s Miami-Dade County and then everywhere else. Development is active west of the Intercoastal Waterway, and occupancy on Miami Beach is often 80%-plus.
– The cost of money remains low. Equity is coming at the sector from all directions. It’s a good time to buy or sell.
– The entire focus of the travel industry is appealing to Generation Y. This has huge implications for common area design and hotel amenities.
– Energy efficiency is a key consideration and offers huge potential for cost savings. In some cases, power utilities or the public sector will subsidize retrofits of existing properties with new energy-saving technology.
– RevPAR has been increasing nicely over the past five years, but payroll, benefits, taxes and other operating costs bear watching.
– Where land costs are high, hotels mixed with office and retail uses can be advantageous.
– There’s an “arms race” among hotels to offer the best features and amenities. As new properties come to market, old properties have to revamp or be seen as stale.
– Branding is still important, and the big players still have an advantage in generating consumer interest. And the best deals can most often be found on the brand’s proprietary web site rather than a third-party site.
– Condos are formidable competitors for choice hotel sites. Consequently, land values have escalated. And construction costs have increased 30% to 35%.
– International capital runs the gamut. Some is very smart and disciplined, and some just thinks the hotel market is a sexy place to invest. The latter tends to drive the market in a bad direction.
– Supply is still constrained. The hotel industry in South Florida has three or four years to go before supply will begin to impact the sector.
The show was jam-packed with valuable insights. Click here to listen to the full interview with Bo Ashbel of Aztec Group, Inc., Robert Finvarb of The Robert Finvarb Companies, and Don Weidenfeld of Magnum Energy Solutions.
