Americas Hospitality Newsletter (October 17, 2018)

Fall Brokers Survey 
By Rod Clough, MAI

In this Fall 2018 report from HVS, 40 hotel brokers provide the opinions on the current state of the hotel transaction environment from their viewpoint from 23 markets across the U.S. and 3 markets in Canada. The latest aggregate opinions on going-in cap rates, exit cap rates, discount rates, and RRMs are reported, along with additional parameters and insights. The overall sentiment reflects stability, but with limited inventory for sale and strong buyer interest, most metro areas remain a seller’s market. New supply and the costs of renovating to current brand standards remain top limiting factors.

Disaster-related Hotel Business Loss Recovery – Unique Challenges 
By Mark Earle

Hurricanes Michael and Florence are both gone, but the extent of their destruction is now coming into clearer focus. Hotels and beachfront resorts in coastal areas are particularly vulnerable, and business interruption can be long-lasting. Resolution of a business interruption claim for hotels can be particularly challenging because it can have so many moving parts (hotel departments, for example, are run like mini-businesses within a hotel) and because the loss-of-business duration usually exceeds the physical rebuilding period. When making a business interruption claim, credibility counts.

Equity Yield Rates on the Decline 
By J. Carter Allen and Rod Clough, MAI

HVS continually tracks the rates of return on the assets that we consult on. In our most recent review, we found that equity yield rates, on average, have been declining, due in part to the expectation of slowing EBITDA Less Replacement Reserve growth. The sample size of available data is also a contributing factor.

How Hotels Can Compete in the Airbnb Landscape 
By Mia Mackman

Airbnb came on the scene in 2008, amidst corporate scandal, economic downturn and instability. Initially people were skeptical, but Airbnb has gained remarkable momentum building its platform with transparency and trust, at a time people were greatly seeking both. In the early years, Airbnb's inclusive and diverse model provided low-cost travel options with uncommon flexibility, which became an enticing alternative to the traditional big-name hotel booking systems.

Countdown to the Caribbean Hotel Investment Conference & Operations Summit (CHICOS) 
By Nicole Roantree

This year’s Caribbean Hotel Investment Conference & Operations Summit (CHICOS) (November 8–9, 2018, Fairmont Southampton Bermuda) features many noteworthy panels that are critical for your development decision-making in the region. First, the Caribbean Government Leaders panel consists of government officials from many countries and islands, including some that were directly impacted by the hurricanes in 2017. The U.S. Virgin Islands Department of Tourism, Invest Turks & Caicos, Puerto Rico Tourism Company, Bermuda’s Ministry of Tourism, and Curacao’s Investment & Export Promotion Agency will all be on hand to provide updates on how their areas fared in the 2017/18 season and to share some of their plans for the future. Additionally, the Caribbean continues to attract interest from international investors following the very active 2017 hurricane season and other challenges encountered in 2015/16. Despite these difficulties, there has been a lot of capital to develop, acquire, and/or renovate properties throughout the region, and investors report greater confidence in the current climate than that of the past decade. The Debt & Equity discussion will cover where these investors are coming from and who is providing the capital. Attendees will hear from the sources and end-users themselves.

HVS Market Pulse: Sacramento, CA 
By John Berean and Li Chen

Sacramento is experiencing a period of economic expansion, concurrent with growth in the healthcare sector and local development projects. The recent opening of the Golden 1 Center is supporting renewed growth in the city's downtown core. Various planned projects, including the expansion of the Sacramento Convention Center, are also expected to bode well for the market; as such, the overall outlook is optimistic.

HVS Market Pulse: Cincinnati, OH 
By Brian Arevalo

Hotel performance in the Queen City is experiencing record highs, leading to strong interest in hotel development. In this article, we examine what is driving demand growth and how the lodging market will react to an expected supply surge. Hotel supply in the urban core of Cincinnati has grown year-over-year since 2012. Despite the staggering increases in supply, hotel occupancy levels have remained strong, while average rates have improved with the addition of higher-quality supply.

Brokerage & Advisory Investment Opportunity – TownePlace Suites by Marriott New Orleans- Harvey-West Bank 
By Eric Guerrero and Drew Noecker

HVS, as sole and exclusive advisory firm to Ownership, is pleased to present the opportunity to acquire the 96-room TownePlace Suites by Marriott New Orleans Harvey/West Bank, an institutional quality asset located in the of Harvey, Louisiana, situated just five miles south of Downtown New Orleans. The hotel benefits from its affiliation with Marriott International, one of the world’s leading hotel companies. There are approximately 18 years remaining on the Marriott franchise license term for this TownePlace Suites by Marriott. Having recently opened in 2016, ownership has admirably maintained the property, leaving it in excellent physical condition; thus, a minimal change-of-ownership PIP would be expected.

Brokerage & Advisory Investment Opportunity – La Quinta Inn & Suites Houston NW-Beltway 8-West Road 
By Eric Guerrero and Drew Noecker

HVS, as sole and exclusive advisory firm to Ownership, is pleased to present the opportunity to acquire the 72-room La Quinta Inn & Suites Houston Northwest Beltway 8/West Road, a limited-service hotel located in the rebounding Houston Northwest submarket. Built in 2013, the Property is in excellent physical condition; thus, a minimal change-of-ownership PIP is expected. There are approximately 15 years remaining on the franchise license term. The Property is being offered free-and-clear of any management encumbrances, providing an investor with the flexibility to restructure the Hotel’s operations, yield-management strategies, and cost-containment initiatives to maximize top-line revenues and bottom-line cash flows.

HVS Event Speakers 

Meet with an HVS expert speaking at the South Florida Hotel Investment Forum, the Appraisal Institute 218 Annual Fall Conference, the 2018 Annual Convention Counselors of Real Estate, the Northern California Chapter of the Cornell Hotel Society Educational Series Seventh Annual Northern California Hospitality Investment Forum, the Marriott Lifestyle Development Forum, the NYU HSMAI Event, the HX: The Hotel Experience - 4th STR Student Market Study Competition, and the UC Real Estate Roundtable - The Hotel Market: Prospects for 2019.

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