The Pandemic of 2020 significantly disrupted the hospitality industry in an unprecedented way impacting the sector across all geographic markets to a degree exceeding the impacts from the Great Recession and past cyclical downturns. Impacts were initially buffered by stimulus programs and lender forbearance that have now come to an end.
Supply has been impacted by a combination of hotel conversion projects to other higher value uses and a significant reduction in new construction projects provides a tailwind strengthening projected performance.
We believe that growth in supply will remain depressed until 2024-2025 providing a window to acquire assets that will benefit from the material improvement in occupancy and average daily rate (ADR) over the next several years.
Owners suffering from capital calls during the last 18 months who may be facing a brand mandated Property Improvement Plan (PIP) see an exit from their investment as increasingly attractive to harvest value and avoid further capex expenditures.
Acquire assets at a discount to replacement value and historic value multiples, execute proprietary “value-add” strategies to drive current income and future valuations, provide internal asset and hotel management services to maximize asset performance and, execute a disciplined exit strategy to maximize investor total return.
Hospitality real estate, such as hotels, offer more income diversification and income stability than investing in single family residences or industrial commercial assets. If a tenant vacates an asset, income drops to zero while expenses continue. Conversely in a hotel employing effective revenue management, seasonality can be managed with dynamic pricing to drive occupancy and RevPAR [Revenue per Available Room], and variable expense control used to drive margin yield.