September Marked Third Consecutive Month of U.S. Hotel Construction Growth

The DJIA fell 91 points, Nasdaq was down 53, the S&P 500 fell 25 points and the 10-year treasury yield rose another .10 to 4.23%. Lodging stocks were mixed.

Truist believes the companies most likely to see the greatest degree of earnings outperformance this 3Q earnings season will be those with the highest exposure to the group segment, namely the REITs in which Ryman Hospitality at 70% of its business is most exposed. They believe US Group RevPAR was up 75% year over year, stronger than individual transient, which was up 20%. Truist also believes Group strength will show up in the Food and Beverage line. For C Corps they believe the upside will likely come from RevPAR at their international locations, namely Europe, Canada and the Caribbean. Truist lowered price targets on BVH to $46 from $56, PEB to $18 from $24 and RLJ to $15 from $17. They maintained Buy ratings on BVH and RLJ and a Hold rating on PEB.

Apple Hospitality REIT upped, again, their monthly cash dividend. The monthly distribution will now be $0.08 per common share, up from $0.07.

A new survey from the Hospitality Asset Managers Association painted a somewhat rosy picture for the industry, but board members for the organization say their outlook has soured considerably in the two weeks since results were collected. Roughly 80% of respondents said they are actively pursuing acquisitions, but HAMA leadership now says a lack of financing and increasing interest rates pushed almost everyone out of the market. The survey also reflected a remarkably low level of distress, with just 5% saying they’ve been in a forced sale situation or handed back keys to a lender or expect that to happen soon. Board members now believe distressed assets could become more prevalent with the high cost of debt and waning patience from lenders. One thing that hasn’t changed since the completion of the survey is continued worries about the labor environment, which HAMA members have been ranking as their top challenge since before the pandemic. More than 80% ranked labor availability as the obstacle they are most concerned about right now, making it the top issue followed closely by costs. 

According to September 2022 data from STR, the U.S. hotel industry reported higher performance from the month prior and improved comparisons with 2019. September 2022 (percentage change from September 2019: Occupancy: 66.7% (-0.6%); ADR: $154.32 (+16.9%); and RevPAR: $103.00 (+16.3%). Among the Top 25 Markets, New York City experienced the highest occupancy level (86.1%), which was down 3.8% from the market’s 2019 benchmark. Markets with the lowest occupancy for the month included New Orleans (55.2%) and Houston (57.4%). New Orleans also reported the steepest decline in occupancy when compared with 2019 (-16.6%). Reflecting continued improvement in business travel groups, the Top 25 Markets showed higher occupancy and ADR than all other markets. 

September 2022 was the third consecutive month with an uptick in U.S. hotel construction, according to STR. At a market level, New York City, Phoenix and Nashville are set to see the largest supply percentage increases from current construction. Among the chain scales, the Luxury and Upscale segments lead in that measurement. U.S. hotel pipeline, September 2022 (percentage change in comparison with September 2021): In Construction: 156,861 rooms (-8.9%); Final Planning: 173,932 rooms (-15.5%); and Planning: 282,225 rooms (+7.0%). When looking at the in-construction phase of the pipeline, luxury chain scales show the highest number of rooms as a percentage of existing supply. In order: luxury (5.7%, 7,777 rooms); upscale (4.6%, 40,620 rooms); upper midscale (3.5%, 41,422 rooms); upper upscale (2.9%, 19434 rooms); midscale (2.5%, 10,870 rooms); and economy (0.9%, 6,206 rooms). New York leads the major markets in rooms in construction as a percentage of existing supply. In order: New York City (9.4%, 12,000 rooms); Phoenix (6.6%, 4,558 rooms); Nashville (5.6%, 3,181 rooms); Detroit (5.0% 2,343 rooms); and Miami (4.8%, 3,106 rooms).

A new municipal urban development program for Cancun shows the possibility of another 3,000 rooms. Jesus Almaguer Salazar, president of the Cancun, Puerto Morelos and Isla Mujeres Hotel Association referred to the addition of that many rooms as “irresponsible”. Salazar feels everyone should be concerned about the over-densification approved for the Pok-Ta-Pok Golf Club because it will exceed the Hotel Zone. Close to 3,000 additional rooms could be added in the Pok-Ta-Pok area along and several organizations and associations have already filed complaints against the recently approved PDU. The addition of that many rooms will not only cause traffic problems, but also add to the already overloaded service structure of the Cancun Hotel Zone. Presently there are hotels and a residential development that already suffers from flooding from drainage overflows when it rains. 

IHG Hotels & Resorts announced the opening of its newest avid hotels property in Wenatchee, WA. The new hotel offers 95 rooms, an indoor pool and gym. The avid hotel Wenatchee is owned by OM Sai Baba LLC and managed by Sean Verma Hotels.

Essex Hotel Management, LLC has added Crowne Plaza Lake Placid in Lake Placid, NY, to its growing portfolio of hotels on the East Coast. This marks the first IHG property in the third-party hotel management company’s portfolio. The property has been owned and operated by the Lussi family for more than 50 years. The 246-room property offers a restaurant, great rooms and bar, indoor pool and a hot tub, and a fitness room. In addition, all guests have access to a private beach, the historic Lake Placid Club’s 45 holes of championship golf, and a cross country ski and snowshoe center. The property also has 22,000 square feet of flexible function space.

Best Western Hotels & Resorts announced the opening of the Best Western Plus Brooklyn-Prospect Park in Brooklyn, NY. Owned by Mahesha Ratanji, the hotel offers 67 guestrooms, a fitness center and a business center.

According to David Rachie, one of the hotel developers from SBMC LLC, the 116-room hotel that’s part of the River City Renaissance project, in Mason City, IA, is expected to break ground before the end of the year. 

The developers of Bridge Park in Dublin, Ohio, are partnering with Columbus restaurateur Cameron Mitchell to build a hotel, conference center and restaurants in an expansion of Bridge Park to the south. Few details are available yet on the project, which is a partnership between Bridge Park developer Crawford Hoyingand Cameron Mitchell Restaurants, but the hotel, conference center and restaurants would be part of a broader mixed-use complex that would likely include residences. Cameron Mitchell expects to have one hotel tower and one condo tower, with a signature restaurant in the hotel building, and is hoping to have the development open by 2025.

Caesars Entertainment and SL Green confirmed in a New York Times story that they are partnering up to bid for a Downstate New York casino license. The two plan to redevelop 1515 Broadway in Times Square as an entertainment and gaming destination. Caesars Palace Times Square will even be designed to include a Broadway Theater for The Lion King. Since they are renovating and not building from scratch, they believe it will give them an upper hand in the bidding since they can say they will open quicker. It is going to be a very expensive bidding war with most likely four to five bidders for what we believe will be one available license.

Canyon Ranch has partnered with VICI Properties Inc. to secure up to $200 million in capital to develop an Austin resort in the Texas Hill County, with plans to begin construction in 2023 and open to guests in 2025. More ambitiously, Canyon Ranch plans to open urban wellness clubs, Skift reported. It plans to open mid-size, partial-service facilities in Houston in early 2024 and Fort Worth, TX by the end of 2023. VICI also obtained a right to acquire a couple of Canyon Ranch’s properties in Tucson, Arizona and Lenox, Massachusetts, if the wellness company chooses to sell the real estate. The brand would continue to operate the facilities essentially as a management company.

Tilman Fertitta received approval from the Clark County Commission in Nevada fora proposed 43-story, 2,420-room hotel-casino on the corner of Las Vegas Boulevard and Harmon Avenue. The project will include convention space, a spa, wedding chapel, car showroom, theater, restaurants and a casino.

Mumford Company completed three strong quarters of sales transactions in 2022 and continues on this robust path into Q4 2022. Some of their recent transactions include: the 100-room Courtyard by Marriott Columbia-Cayce, in Cayce, SC; 59-room Candlewood Suites in Hopewell, VA; 60-room Red Roof Inn & Suites in Biloxi, MS; 67-room Best Western in Kilmarnock, VA; 55-room Super 8 in Norton, VA; and the 71-room Sleep Inn & Suites in Gulfport, MS.

RobertDouglas advised Sandstone Properties in securing a pre-development bridge financing for the development of 6400 Canoga, a 4.7-acre site in the Warner Center 2035 Specific Plan in Woodland Hills, California. The new, $28 million non-recourse financing was provided by a direct private lender specializing in ground up commercial and residential real estate financing. The 4.7-acre site redevelopment site currently consists of a three-story Class B multi-tenant office building and 457 surface and structure parking spaces. Sandstone Properties acquired the asset in February 2019 and has since obtained entitlements to develop a 650-unit, 35-story high-rise apartment building on the location of the existing parking structure. The entitlements also allow for the 10,000 square foot expansion of the existing office building and its conversion to a four-story, 240-key luxury hotel.

The first W Hotel & Resort will open in Punta Cana in 2024. A new agreement has been signed between Marriott International, Grupo Puntacana, and Mac hotels to build the new resort in the Dominican Republic. Only certain information is available about the new W Hotel & Resort in Punta Cana: it will have 349 rooms; it will be an all-inclusive and adult-only property; it will have a beachfront; and it will be located in Uvero Alto, north of Punta Cana.

Nine years after Guoman Hotels rebranded as GLH, the UK-based hotel owner-operator has decided to rename itself the Clermont Hotel Group. The Group has two properties called The Clermont, both in London, and owns and manages the Thistle and Thistle Express brands, the Hard Rock London and Guoman Hotels, which includes the Royal Horseguards Hotel.