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North America

U.S. Investors Optimistic About the Hotel Market

Alan Woinski and Kim Woinski
May 28th, 2024 at 5:46 PM EDT

Skift Take

The 2024 CBRE Global Hotel Investors Intentions Survey indicates U.S. hotel investors are optimistic, with plans to increase investments, despite challenges like debt servicing and rising costs, favoring urban and leisure markets such as New York City, Miami, Charleston, and Boston.

The DJIA was down 217 points, while Nasdaq was up 99 in another mixed-up market. The S&P 500 rose a point, and the 10-year treasury yield jumped .08 to 4.54%. Lodging stocks were lower across the board. VCSA was the biggest loser, down 16% to another new low, while SOND was down 8% on the day.  

Baird upgraded its rating on Sunstone Hotel Investors to Outperform. The firm upped their price target to $12 as they believe investors are overly discounting the renovation-related disruption and they view the earnings ramp up and 2025-2026E outlook as attractive and not fully captured in current estimates, which appear too low.  

Baird maintained their balanced view on Hotel REITS. While fundamentals have been better, it is still sluggish overall so far quarter to date. Baird believes urban markets and the group segment continue to outperform, and narrative/expectations remain strong among investors. They believe investors are still skeptical, particularly toward the 2H24 expected performance ramp-up that is embedded in many companies’ full-year guidance. Baird continues to be surprised that the market does not better differentiate companies based on their balance sheets and capital allocation flexibility that low leverage provides in today’s slower-growth backdrop.

Truist Securities met with Vacation Ownership management teams and investors, noting there was strong investor attendance as compared to previous visits. They came away with a positive view, upping their price targets on HGV to $71 from $70, VAC to $161 from $159, and TNL unchanged at $65. They have Buy ratings on all three.  

CBRE Hotels Research conducted a Global Hotel Investors Intentions Survey in early 2024 to assess the climate for hotel investment. The Executive Summary of this Survey found that U.S. investors generally have a positive sentiment about the hotel market this year, with half of those surveyed planning to increase their hotel investments in anticipation of higher total returns and lower prices. Strengthening the balance sheet and difficulty in securing and servicing debt are the top challenges for those who plan to buy less this year. Central business districts and resorts are the most favored location types, while upper-upscale and upscale/upper-midscale are the most popular chain-scale targets in 2024. CBRE expects RevPAR growth of 3.1% for urban locations from increased group, business, and international travel. They also expect that steady leisure demand and modest ADR gains will support 1.6% RevPAR growth for resort locations. Increased borrowing costs and labor expenses are the biggest challenges for hotel investment this year, followed by higher insurance costs, which will most likely lower margins. Major urban markets like New York and Washington, D.C. are expected to have the strongest level market fundamentals in 2024, along with leisure-focused locations like MiamiCharleston, and Austin. Given limited new hotel supply and restrictions on short-term rentals, New York City is 2024’s most attractive investment market, followed by MiamiCharleston, and Boston.  

The World Travel & Tourism Council is forecasting a historic year for Canada’s Travel & Tourism sector this year, with an economic contribution set to reach an all-time high of almost $182BN. In partnership with Oxford EconomicsWTTC’s latest research highlights a sector abundant with opportunities, supporting 1.84MN Canadian jobs, with an increase of 120,000 jobs compared to the previous high point in 2019. Last year, the Travel & Tourism sector’s GDP contribution grew by almost 25% year-on-year to reach almost $172BN. Additionally, the sector proved to be a significant source of employment, creating 85,000 new jobs and elevating the total to 1.7MN nationwide. The resurgence of international visitors to Canada has been notably strong, with international spending increasing by 42% to $41.3BN. According to WTTC forecasts, the outlook for the next decade is bright as by 2034, the sector is expected to dramatically enhance Canada’s economy, contributing an estimated $248BN and comprising 7.1% of the total economic landscape. This industry is also projected to be a major source of job creation, expected to provide employment for 2.3MN people nationwide, indicating that 10% of the workforce will be engaged in the sector.  

PBA Group of Companies and its partner Concord Hospitality have started converting the former 12-story office building, Canadian Centre, into an Element Hotel by Westin. The 226-suite Element Hotel is the first hospitality project as part of the Downtown Calgary Development Incentive Program. The 12-floor hotel will offer an elevated lobby lounge and café, an upscale casual dining experience on the 12th floor, common areas, meeting rooms and a fitness center. Demolition is completed and with construction now underway, the project completion is slated for the summer of 2025.  

Vision Hospitality Group, in collaboration with The Nichols Partnership and BMC Investments, announced the grand opening of Moxy Boulder, a new hotel to University Hill in Boulder, Colorado. The hotel features 189 rooms, over 5,300 square feet of versatile indoor and outdoor function space, a fitness center, engaging lobby area, Moxy Bar and lounge, and 10,000 square feet of ground-floor retail space.  

Venture Oaks Real Estate Group is planning a mixed-use Canopy by Hilton Hotel project in downtown Sacramento, California. The 14-story hotel and apartment project called Capitol Hotel and Apartments would have 265 hotel rooms as well as 55 apartments. A rooftop lounge, outdoor terrace and ground floor bar/restaurant are also part of the $90 million project.  

First Hospitality assumed management and operations of Hotel ArdentDayton, OhioLively HotelOklahoma City, Oklahoma; and opened Tempo by Hilton Louisville Downtown NuLu on May 1, 2024. First Hospitality is set to open and has assumed management of seven new restaurants, including its first international property, Carnivale Bahamas, located on Paradise IslandFirst Investors, an affiliate of First Hospitality, continues strategic investments in two new development projects, the 130-room Tempo by Hilton Louisville Downtown NuLuand the 118-key Hotel Ardent, a Tapestry Collection by Hilton hotel set to open this fall. In partnership with Veritas DevelopmentGatehouse Capital is leading the development of the Lively Hotel at OAK, a new mixed-use community in Oklahoma City, which is scheduled to open in late August. The 132-key Lively Hotel is First Hospitality’s first Oklahoma property and will become the first Tapestry Collection by Hilton in the state.  

Azul Hospitality Group has been selected to manage the Monsaraz San Diego Tapestry Portfolio by Hilton. The 92-room hotel features two meeting rooms with almost 5,000 square feet of space and a fitness center. Azul Hospitality Group’s culinary concept team will re-brand the restaurant concept.  

Hospitality Ventures Management Group provided results for the company’s first quarter of 2024, including the addition of three new third-party hotel management agreements and above-industry average results in RevPAR. Additionally, the company named Heidi Nielsen Vice President of Business Development. Most recently, Nielsen was Vice President of Asset Management and Investments for Meyer Jabara HotelsHVMG’s year-to-date RevPAR Index exceeds 110%, up 3.5% YTD. The three new hotels include The 30-unit Islands of Islamorada in Islamorada, Florida; The 158-suite Homewood Suites St. Louis Galleria in Richmond Heights, Missouri; and the 128-suite TownePlace Suites Brentwood in Brentwood, Missouri.  

Peachtree Group received its I-956F approval from the United States Citizenship and Immigration Services for the development of a Home2 Suites by Hilton in Boone, North CarolinaPeachtree originated $21.7 million of fixed-rate construction financing over a five-year term for Narsi Properties to develop the 105-room hotel, which is expected to be completed by Fall 2024.  

A multi-year effort to transform an office tower into a high-end hotel has taken more time and money than anticipated. As a result, the opening of the long-awaited InterContinental San Antonio Riverwalk has been pushed back again. The hotel has been in the works since Trailbreak Partners and Scarlett Hotel Group purchased the 21-story structure in June 2021. Ownership initially expected the renovation would take roughly 18 months to complete. In March, it expected to open the 390-room hotel by this summer. However, the group that will manage InterContinental San AntonioIHG Hotels & Resorts, says the opening has now been moved to fall. What was initially expected to be a $50 million renovation in 2021 had become a nearly $160 million investment as of last spring.  

IHG Hotels & Resorts celebrated the opening of a new Holiday Inn Express & Suites in Kernersville, North Carolina. The hotel offers 93 rooms and 345 square feet of meeting space, a seasonal outdoor pool, a fitness center and a business center. Holiday Inn Express & Suites Kernersville South is owned by Nexus Hospitality LLC and managed by SAP Hotels LLC.  

Sonesta International Hotels Corporation announced the opening of Sonesta Essential Van Buren. The 47-room, upper-midscale property is located in Van Buren, Arkansas.  

The Crawford Hotel at Denver’s Union Station underwent a major renovation for its 10th anniversary. After a decade in service, all 112 rooms got a luxurious update, and the hotel now has a new lobby space with private elevator access. More renovations are expected to be completed on the Colorado hotel this July to commemorate the 10th anniversary of the revitalization of Union Station. The $11 million renovation will also include the Great HallCooper Lounge and 8,000 square feet of meeting and event space.  

Forum Hotel and Hospitality Development Corp is proposing a large mixed-use project with a luxury hotel, condos, restaurant, and retail in Downtown Memphis, Tennessee. The plan includes a 15-story, 191-guestroom Blues Note Hotel with a guitar-shaped rooftop pool along with a nine-story condo complex with 65 units and a three-floor parking garage. A second-phase boutique hotel is also proposed on the same development site.  

Paramount Lodging Advisors announced the upscale, premium-branded, 78-key Residence Inn in Merrillville, Indiana. The Residence Inn Louisville East was put up for auction with a starting bid of $2MM. The auction is being held on the Crexi platform on June 24. Paramount Lodging Advisors is representing the seller in the auction. The 96-key property offers fifteen, two-story buildings.  

The Residence Inn Madison HeightsMichigan was put up for auction with a starting bid of $1.6MM. The auction is being held on the Crexi platform beginning on June 24. PLA is representing the seller in the auction. The 95-key property offers eight, one-story buildings.  

The 80-key Residence Inn Lexington North in Lexington, Kentucky was put up for auction on the Crexi platform beginning on June 24, with a starting bid of $1.5MM. PLA is representing the seller in this auction.   The 72-key Residence Inn BinghamtonNew York, was put up for auction with a starting bid of $1.9MM. The auction will be held on the Crexi platform on June 24. Paramount Lodging Advisors is representing the seller in this auction.  

Wyndham Hotels & Resorts, Inc. completed the re-pricing of its existing $1.1 billion Senior Secured Term Loan B Facility due May 2030. The Term Loan B garnered significant investor demand, resulting in an upsize of $400 million while in the market and an attractive interest rate of SOFR plus 1.75%. The re-pricing of the existing $1.1 billion Term Loan B is expected to result in annual interest expense savings of approximately $6 million. There is no change to the company’s maturities or covenants from the re-pricing on the now combined $1.5 billion facility.

Personnel Moves

Hotel Equities announced the promotion of three senior leaders to support the firm’s elevated performance and growth. David Rosenberg, who joined HE in 2020, along with Peter Tziahanas, who has been with HE since 2021, have both been promoted to Executive Vice President of Operations. Toi Brown, who joined the firm in 2018, has been elevated to the position of Senior Vice President of Human Resources.  

TEKMAK Development Company has promoted Glenn Decker to President. In his new role, the former Vice President of Operations will be responsible for the growth and direction of the company as it seeks to expand its hospitality portfolio. Deckercomes to TEKMAK from USAA. The company also announced that Thomas Kirkland will remain as CEO.

Hotel and Lodging Performance

Daily Lodging Report subscribers get full access to insights from ST200 as part of their subscription.

The Skift Travel 200, a tool from Skift Research, makes it easy to track travel industry performance as a whole, as well as within specific sectors. The Accommodations sector includes public companies in these sub-sectors: 

  • Global Hotel Brands
  • Hotel Management and Operations
  • Hotel REITs
  • Regional Hotel Brands
  • Time Shares
  • Alternate Accommodations
Alan Woinski and Kim Woinski
May 28th, 2024 at 5:46 PM EDT

Companies: Hospitality Ventures Management Group, Azul Hospitality Group, Canopy by Hilton, Concord Hospitality, Element, First Hospitality, Gatehouse Hospitality, Hilton Grand Vacations, Holiday Inn Express, Home2 Suites by Hilton, Homewood Suites by Hilton, Hotel Equities, IHG Hotels & Resorts, InterContinental, Moxy Hotels, Peachtree Group, Residence Inn by Marriott, Sonder Holdings Inc., Sonesta Essential, Sonesta International Hotels Corporation, Sunstone Hotel Investors, Inc., Tapestry Collection by Hilton, Tempo by Hilton, TownePlace Suites, Travel + Leisure Co., Vacasa, Wyndham Hotels & Resorts

Locations: Austin, Boston, California, Canada, Charleston, Denver, Florida, Indiana, Kentucky, Memphis, Miami, Missouri, New York City, North Carolina, Ohio, Oklahoma City, San Antonio, San Diego, St. Louis, Washington DC

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