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Investing in Hotels & Motels
U.S. Hotel Developers Run Out of Cash as Construction Lending Dries Up (Reuters, Jun. 5, 2023)
“Hotel developers, private equity firms, and general contractors told Reuters the financial stress on regional banks -- the largest lenders to hotels and other commercial real estate markets -- has forced developers to postpone projects or find other creative ways to raise capital.
The hotel industry's predicament highlights the impact on the broader U.S. economy of the regional banking crisis, which resulted in the failure of three mid-sized U.S. lenders and prompted a flight in deposits to larger banks.
U.S. Hotels Report 66.8% Occupancy for Week Ending May 27th – Up 0.6% from 2022 (HNR Hotel News, Jun. 2, 2023)
“Among the Top 25 Markets, Washington, D.C., saw the highest year-over-year occupancy lift (+10.5% to 76.2%). Of note, New York City registered the highest occupancy level (85.7%), helped by Taylor Swift’s Eras Tour. Detroit reported the largest increases in ADR (+16.9% to US$137.08) and RevPAR (+29.0% to US$91.54) over 2022. The steepest RevPAR declines were seen in Miami (-10.0% to US$143.51) and Dallas (-7.0% to US$83.35).”
Investing in Hospitality REITs (The Motley Fool, May 11, 2023)
“A hotel REIT is an option for investors interested in commercial real estate, who have strong stomachs, and who are prepared to handle some wild ups and downs as hospitality cycles run their course. They're not bad investments, but investors should know what they're getting into before choosing lodging REITs since they differ from hospitality stocks and other stock market sectors. Diversification can even out the bumps of hospitality cycles in a portfolio containing hospitality REITs, depending on the composition of the REITs you choose.”
AHLA: 82% of Surveyed Hotels Report Staffing Shortages (Hotel Management, Jun. 6, 2023)
“Seventy-five percent of respondents are increasing wages, 64 percent are offering greater flexibility with hours and 36 percent are expanding benefits—but 87 percent say they are still unable to fill open positions. Eighty-two percent of survey respondents indicate they are experiencing a staffing shortage, 26 percent severely so—meaning the shortage is impacting the hotel’s ability to operate. The most critical staffing need is housekeeping, with 40 percent ranking it as their top hiring need.”
The Ultimate Guide to Hotel Operations (Hotel Tech Report, Feb. 8, 2023)
“Running a hotel successfully isn’t easy. Hospitality management and operations is complex, with many interlocking pieces and dependencies. Hotel managers have to be great at time management, context switching, and problem solving. In a single hour, you may go from placating an unhappy guest to cleaning guest rooms, analyzing guest service requests, handling a plumbing emergency to interviewing a front office manager candidate to reviewing the latest revenue management report.”
20 Hotel Tech Innovations to Know (Hotel Management, Jun. 17, 2022)
From outdoor wireless connectivity to virtual front desks, guest expectations are evolving – are you ready to meet their expectations? This list of 20 hotel technology innovations is wide ranging, but certainly focuses on better connectivity (outdoors, high-speed), high tech furniture, cleaning, and check-out procedures, and improved accessibility.
Safety & Security Issues
Two Easy Ways to Increase Your Hotel’s Security and Compliance (HospitaltiyNet, Jun. 6, 2023)
First, make sure to protect your most valuable assets – your staff. Personal, mobile panic buttons can be purchased for staff to make sure they remain safe when alone in a guest’s room. Protecting your hotel from ever-increasing fraud is also an utmost priority, but you can minimize fraud by using chip-based payment systems, among other things.
How Proactive Technology Can Help Keep Guests, Employees Safe (Hotel Management, Jun. 16, 2023)
“Hotels can gain effective—and discrete—security results by implementing proactive safety technologies, such as license plate recognition systems. By creating a virtual perimeter around the hotel property, management can ensure the safety of guests, staff and buildings, while maintaining an air of sophistication and separating the guests from the intrusion of security.”
How to Optimize Data Security at Hotels (Hospitalitynet, Apr. 13, 2022)
“One of the first considerations when it comes to data security in hospitality businesses is to ensure that your staff is trained. The majority of data breaches today stem not from direct attacks but from human error. It’s all too easy for employees to make a mistake that leaves your data open to hackers who are all too happy to exploit it.”
Appraisal Meant to Determine if Housing Commission Overpaid for Pandemic-Era Hotel Can’t Answer That Question (Voice of San Diego, Mar. 17, 2023)
“Nearly three years ago, the Housing Commission acquired the property for $67 million with the help of a broker who, the agency later learned, bought 40,000 shares in the company that sold the hotel before he identified it as a target and negotiated the purchase price. The controversy immediately raised the question: Did the city overpay for the hotel that was purchased under the cloud of a conflict of interest-scandal? That’s because of the original purchase appraisal. The appraiser determined the value of the hotel as though it was February 2020. But the city bought the hotel in August 2020, after Covid-19 completely shut down the tourism industry”
3 Ways to Calculate Valuation for a Hotel Appraisal (Hospitalitynet, Jan. 27, 2022)
“There are three typical and most widely recognized approaches to determine the value of real estate. These are: cost, income capitalization and sales comparison.The Uniform Standards of Professional Appraisal Practices (USPAP) requires that the hotel appraiser address any, and all, of the approaches necessary to produce a credible result.”
3 Ways to Calculate Valuation for a Hotel Appraisal (Cayuga Hospitality Consultants, Jan. 25, 2022)
There are three widely used methods of valuing real estate – cost, income capitalization, and sales comparison. “Additionally, non-real estate characteristics (ie franchise) and the economic issues such as RevPar, Gross Room Revenue Multiplier (GRRM), capitalization rate and NOI per room are considered. Often these adjustments are made from a qualitative basis vs. quantitative. For instance, is the subject’s location the same, inferior or superior. Due to all of these considerations, the Sales Comparison approach is generally considered to be the least reliable.”
eBooks & Other Resources
The following eBooks and digital audiobooks are available to NAR members:
Chocolates on the pillow aren't enough: reinventing the customer experience (eBook)
Commercial Real Estate Restructuring Revolution: Strategies, Tranche Warfare, and Prospects for Recovery (eBook)
Growth Strategies for Hotels (eBook)
Hotel Success Handbook (eBook)
Books, Videos, Research Reports & More
As a member benefit, the following resources and more are available for loan through the NAR Library. Items will be mailed directly to you or made available for pickup at the REALTOR® Building in Chicago.
2019 Hotel Management Survey (Hotel Management, 2019) E
2019 Hotel Management Survey Top Design Firms (Hotel Management, 2019) E
Commercial Real Estate Quarterly Market Survey (National Association of REALTORS®)
See this report for quarterly cap and vacancy rates for hotel properties.
Resort Development (Chicago: Urban Land Institute, 2008) NAC 1800 Ur1rd1
Climbing the Real Estate Risk Spectrum (Chicago: Real Estate Research Corp., 2007) HD 1375 R22c
Have an idea for a real estate topic? Send us your suggestions.
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