NHIF Spring 2018 Meeting
We recently attended the NHIF Spring 2018 meeting in Seattle, WA. The event was held at the Embassy Suites by Hilton Seattle Downtown Pioneer Square, which opened for business on March 21, 2018. This 282-guestroom hotel is 23 stories high and includes 35,000 sq. ft. of meeting space and approximately 200,000 sq. ft. of related office/retail space. The hotel portion of the development is built on a 12,000-sq. ft. footprint… Wow!
The centerpiece of this event was a panel discussion about Private Debt Funds. Specifically, learning about who these lenders are, how they are capitalized, what they offer, and how to access them for hotel projects. The four private hotel lenders on the panel were:
- Mathew Crosswy – President of Stonehill in Atlanta
- Felix Gutnikov – Principal, EVP-Origination of Thorofare Capital, Inc. in Los Angeles
- Russell Munn – Managing Director of Hospitality of Lowe Enterprises Investors in Los Angeles
- Tara Waldier – Vice President of Rockbridge Capital in Columbus
For more information about the Private Debt Funds, review the following:
Why private debt funds have clear advantages in the current lending market
Also at this event, Mark Lukens – Managing Director of LW Hospitality Advisors presented his Pacific Northwest Hotel Transaction Update and SWOT Analysis. This presentation covered NW hotel sales statistics, noteworthy transactions, and a SWOT analysis of some current hospitality investment issues. Below is a quick summary:
In 2017, hotel transaction volume in the Pacific Northwest was down 47%. While there were a similar number of transaction compared to 2016 (79 sales vs. 76 sales) the major difference in volume was due to lower average price per room per transaction. In 2016, the average price per room was $166,674 and in 2017, this was down 29% for an average price per room of $118,684. The median price per room for properties was $85,596 in 2016 and was $75, 836 in 2017. *Sources: RCA, Costar, LWHA
According to the presentation, hotel sales generally occured in the smaller markets with fewer sales in urban markets. In Q1 2017 the highest priced sale was the Alexis in Seattle, WA at $657,000 per key sold in March 2017. The highest price sale in Q1 2018 was The Porter Hilton Curio in Portland, OR at $489,000 per key sold March 2018.Research shows that buyers are now largely private equity and foreign investors. Some of these changes can be attributed to the retreat of REITs, uncertainty caused by new supply in the market, tighter underwriting, a disconnect between buyers and sellers in urban markets, and buyers chasing long-term yield.
The SWOT Analysis for the US Hotel Industry:
Strengths
- Increasing US Gross Domestic Product
- Record US stock market metrics
- US consumer confidence highest in 17 years
- Nationwide new hotel supply is not devastating
- Airbnb impact and growth slowing
Weaknesses
- Fewer international tourists are visiting the US
- Slow RevPAR Growth
- Industry labor shortage
- Rising tax burdens
- Rising commercial property insurance rates
Threats
- Rising capitalization rates
- Resort fees back in the spotlight
- Online hotel booking scams
- Climatic events
- Rising guest acquisition costs
Opportunity
- 2018 corporate hotel rate negotiation equilibrium
- Late cancellation fees
- Basis plays: Fontainebleau Resort Las Vegas
- On demand model
- Houston, NYC, Washington D.C. & Amazon HQ2 City
- Increased Airbnb regulation
- Theft protection
Thank you and we look forward to the 2018 NHIF Fall Meeting!
Brian & the NW Hotel Investor Team
