One Hotel Investor's Big Secret
When your capital has a short window, you can’t wait and hope that the hottest new hotel trend will explode overnight. (That means you, hipster hotel made out of mustaches.) That’s why Laurus Corp has set its sights on the corporate traveler, who’s making a quick comeback.
The firm invests with a private equity fund vehicle on a limited time horizon, CIO Austin Khan (snapped with CEO Philip Cyburt and chairman Andres Szita) tells us. In the Chicago (as well as national) hotel market, Laurus has found that corporate necessity trips have benefited most directly from growth in the economy for the near to immediate term. By comparison, resort-type hotels are a lot more driven by discretionary income and travel, which bring many more variables into play, he says. (Such as, do I want my golf game to be seen in public?) The strategy is guiding the LA-based firm’s $6.5M reno of the 362-room Renaissance O’Hare Hotel, 8500 W Bryn Mawr, which it picked up for $19M last summer.
Laurus has started upgrading soft goods in the hotel rooms (above) and will work on refreshing meeting spaces and a modern restaurant concept later this year. Occupancies and room rates are trending up around O’Hare, Austin says, and the best sign for the market has been a flurry of transactions like Loews Hotels and Resorts' recent acquisition of the Intercontinental Chicago O’Hare Hotel, soon to be Loews Chicago O’Hare. The Renaissance’s competitive edge will be a focus on group corporate travel midweek (incentive trips, association business, awards banquets, training sessions), and the revival of its social catering (like weddings) on weekends, he says.
A shaky, bad weather Q1 in Chicago gave the firm some pause, Austin says, but tailwinds like a growing downtown convention business will bring good things to the ‘burbs. He thinks the local supply/demand balance is relatively in check (unlike places like NYC growing at 10% of existing inventory), and says Laurus plans to close another three or four value-add deals nationally this year, with a close eye on Chicago. They’re seeing the biggest pricing spread on full-service upscale hotels versus replacement cost, with more opportunities to buy at a significant discount (and serve a larger swath of corporate customers) than limited or select-service assets. This summer, Austin’s headed to France with the family and can’t wait to see The Palace of Versailles (above) up close and personal.