Truist Takeaways: Optimistic Yet Still Uncertain

The DJIA rose 528 points while Nasdaq was up 139, the S&P 500 was up 56 points and the 10 year treasury yield was up .04 to 3.61%. Lodging stocks were higher. The big mover was BHR, up 5%. VCSA traded down to another new low.

Truist reported on takeaways from their Lodging/Leisure conference they had last week. Truist said management tones remained relatively positive but realistic that the macro remains uncertain and with relatively limited demand visibility heading into 2023. Booking windows remain relatively short overall including group business, but some companies noted group bookings for 2023 appear strong with excellent booking activity in the last few months that expect to be filled in by closer to arrival groups. Last weeks’ STR results were soft with no excuse for them. Management teams did not dispute the weakness but did not acknowledge if they viewed it as a concerning trend. There is a large divergence in expectations on corporate rate negotiations. The range is +4-5% year over year to low double digits on the high end.  As for pipelines, more conversions and more brand acquisitions, with less new construction is expected. Truist believes this is more positive for the REITs/Owners than the C-Corps even as REIT sentiment is more challenged due to macro demand concerns. As for M&A, if C-Corps become more stringent on CapEx for hotels with deferred maintenance, some REITs assume that some private hotel owners including private equity may prefer to sell hotels. Several REITs, but not all, suggested 2023 could be better than 2022 once debt markets open.

According to CBRE’s September 2022 Hotel Horizons forecast for the overall U.S. lodging industry, rooms RevPAR will exceed 2019 annual levels in 2022. This is driven by the accelerated recovery of ADR which first occurred during the first quarter of 2021. Unfortunately for the owners and operators of full-service, convention and resort hotels, food and beverage revenue is lagging in recovery and yet to return to pre-COVID levels. This can be attributed to a combination of the following factors: health regulations; the lag in group demand recover; staffing shortages; relaxed brand standards; and cost control measures. Despite growth in 2021 and 2022, CBRE estimates that 2022 annual F&B revenue levels for the hotels in their sample will be just 88.3% of 2019 levels at years end. 

IHG Hotels & Resorts unveiled exceptional 2022 results to-date and a robust future for Hotel Indigo. The brand’s continued momentum includes plans to expand upon its current global footprint of 135 open hotels to more than 200 during the next three years, backed by a 124-hotel global pipeline. Hotel Indigo is on pace to surpass 100 open hotels in the Americas by 2025. Among its 2022 signings are its first Americas resort properties in Grand Cayman and Barbados. Hotel Indigo also emerged as an option for dual-branded hotels, with a joint Atwell Suites property now open in Miami’s Brickell neighborhood. Five of Hotel Indigo’s nine total 2022 openings to date have come within the Americas including Hotel Indigo NYC Downtown - Wall Street; Hotel Indigo Flushing; Hotel Indigo Omaha Downtown; Hotel Indigo Silverthorne; and Hotel Indigo Vancouver Dwtn - Portland Area. Additionally, several Hotel Indigo property have undergone major renovations including Hotel Indigo Nashville - The Countrypolitan. Anticipated openings in the Americas before year’s end include New York City’s Financial District and the Galapagos Islands.

Braintree Group has acquired the DoubleTree by Hilton Hotel Bend, in Bend, Oregon. The 117-room property features three meeting rooms totaling 2,327 square feet, an indoor pool, fitness center and business center. Braintree Group is looking to reposition the asset to be included in Hilton’s Tapestry Collection. JLL advised Braintree Group on the financing. Stonehill Strategic Capital provided the financing.

The Mama Shelter hotel brand is opening a new location in downtown Los Angeles’ Fashion District. The adaptive reuse project will turn a former office building into a seven-story, 149-key hotel with a rooftop pool, penthouse suites, rooftop bar and a restaurant on the ground floor. Parking will be located under the hotel and at an adjacent parking lot. Cushman & Wakefield represented the seller of the property, Jamison Services. Shivom LLC acquired the site for $18 million and will be partnering with Hospitality Solutions to construct the adaptive reuse and new construction development, while SBE will operate the concept. An opening date has not yet been announced. 

A South Florida developer recently unveiled plans to build a 27-story oceanfront condominium-hotel on the former site of a 1950’s motel in Daytona Beach, Florida. Eddie Avila hopes to break ground a year from now on the 304-room development, tentatively called the Silver Beach Condo-Hotel.

The fate of the downtown rejuvenation project at the site of the former Hotel Gordon building, in Albany, Georgia, is up in the air as the original developer is looking for a new company to come in and take it over. Due to an illness to 207 Pine LLC principal Jason Benedict, work has been halted at the site, and the company has brought in one potential developer, with two other companies scheduled to look at the site. Originally, the project to renovate the historic building to a hotel and events center with the Marriott International brand was scheduled for completion in the summer of this year. The Gordon Hotel was also set to be the chain’s first black-operated facility.

Lark Hotels announced the addition of Bluebird Lake Placid, the third Bluebird property in New York, to the growing Bluebird by Lark portfolio. Slated to open its first phase on January 11, 2023, Bluebird is conducting extensive renovations of the downtown property to open the property throughout 2023. The serene lakeside retreat will offer 90 rooms, and a bar and tasting room is set to open in mid-2023. 

Fort Worden Hospitality announced the appointment of Matt Gurney as the incoming chief executive officer. Gurney served as the president of the Fort Worden Hospitality board of directors during its conceptualization and launch period. Gurney’s appointment is effective January 15, 2023.

Hyatt’s new hotel in Panama has completed the final phase of what has been a seven-year project. Set in the Casco Viejo quarter of Panama City, the new Hotel La Compania has completed its “American Wing”, including four of the hotel’s food and beverage outlets. 

The Dreams all-inclusive band is opening a new Punta Cana resort in February 2023. The new Dreams Flora Punta Cana is slated to open in the Cabeza de Toro section of greater Punta Cana with 520 rooms and suites, 11 bars and lounges, eight dining options, Dreams Spa by Pevonia, and four pools including a kids’ pool. 

Europe Highlights

Hyatt announced its pipeline of 13 anticipated openings within its luxury portfolio over the next three years across Europe, Middle East, and Africa. The 13 hotels set to open include brands such as Park Hyatt, Andaz, Grand Hyatt, Thompson Hotels, Miraval Resorts and spas, and The Unbound Collection by Hyatt, increasing Hyatt’s luxury brand footprint by over 30% in the EMEA region by 2026. The new Hyatt hotels include four Park Hyatt branded hotels including the return of the Park Hyatt to London; the introduction of the first Hyatt-branded hotel in Helsinki with the debut of The Unbound Collection by Hyatt brand in Finland; the introduction of the Andaz brand to Lisbon; and the unveiling of the first Miraval luxury wellness resort outside of the U.S., located on Saudi Arabia’s Shura Island.

Crest Hotels purchased the former Hilton Avisford Park off a guide price of £8.95 million from Albitar Business Corporation. The property comprises 140 en suite bedrooms, 15 meeting/function rooms, a bar, restaurant, and 270 car parking spaces. There are also extensive health and fitness facilities including a gym, squash court, sauna and steam room, indoor and outdoor pools, tennis courts and a golf course. Knight Frank advised on the sale.

Hungary’s BDPST Group agreed to acquire Budapest’s grand Gellert Hotel, near the Danube, from Indotek Group. BDPST Group did not reveal any further details as the transaction has not closed. The company aims to transform the listed building, which has been closed for a year, into a modern, five-star hotel with 139-150 rooms and suites, while preserving its value as a landmark. 

Perial AM purchased a hotel in the city of Offenback, Germany for €18 million. The hotel joins the portfolio of the SCPI FP Hospitalité Europe. It is operated by Campanile, a brand of Louvre Hotels Group. The asset is a three-star property with 186 rooms and 26 parking spaces and was completely restructured in 2020. Perial AM was advised in this operation by Resource Capital Partners.