Big Changes Ahead for Hotels
A rapidly changing world is creating major flux in the hotel industry, speakers said this week at our national Bisnow Lodging Investment Summit ("BLIS") at the brand-new Marriott Marquis in Washington, DC. In short, an upturn in the turndown industry.
One of our keynotes, Trump Hotel COO Jim Petrus, said before 450 that the firm is embracing social media (including The Donald's almost three million Twitter followers) to expand its brand, noting that Trump Hotels was even able to secure a $250k wedding event off a Pinterest post. ($250k?! The most we ever got was indigestion from a cinnamon-heavy cupcake recipe.)
Jim (here with Hunton & Williams real estate guru Rori Malech) says as for turning DC's Old Post Office into an ultra-luxury hotel, Trump will officially take over June 1. The firm is feeling confident about restoring "a part of Americana," since Trump has extensive experience with historic rehabs like the Grand Hyatt in NYC.
Daily Caller editor and TV analyst Tucker Carlson kicked the festivities off by saying swift changes in demographics, free markets, religion, and ideology are having a profound effect on politics, citing Mitt Romney's recent support of a minimum wage hike as a prime example of how things have shifted. As for 2016, Tucker says that while Hillary Clinton is the presumed Democratic frontrunner, Sen. Elizabeth Warren is actually his pick to take the nomination, since her politics are more closely aligned with the party than Hillary's. (Tell SNL so they have an impressionist ready.)
Another keynote, Thayer Lodging Trust chairman Fred Malek (right, with Pircher Nichols' Gene Leone) regaled the crowd with his investment strategy, which has of late included the purchase of the Ritz Carlton in San Francisco. Fred says the firm won't buy anything unless it's convinced it can double operating income, and also says being conservative on leverage is the way to go. The former Marriott president (1981-1988) also says he operates by a piece of advice JW Marriott Sr. gave him: "Success is never final... the best days are ahead." (Unless you're Cuba Gooding Jr.)
Technology is driving both the owner and guest experience in hotels, says Starwood Hotels SVP Mark Purcell (right), among the 40 hotel experts who spoke at the event. Travelers want the latest and most convenient tech options in rooms and common areas, and owners/operators need updated systems for revenue and booking management, says Mark (joined by Virgin Hotels' Allie Hope and Woods Bagot's Jeffrey Holmes). Allie says Virgin's first US hotel will open in Chicago this fall, and that most big markets are "fair game" for the firm to develop in. (So not just Virginia.)
The state of the lodging industry came from Holland & Knight's Joseph Guay, STR's Jan Freitag, Hotel News Now's Patrick Mayock, HotelAve's Michelle Russo, and LW Hospitality Advisors' Dan Lesser. The best Q1 hotel occupancy was in San Francisco, Nashville, Denver, Houston, and LA/Long Beach. DC was down from last year's inauguration and this year's bad weather. (You think parliamentary democracies call early elections just for the inaugural-based tourism boost?) The pipeline has about 100,000 rooms under construction and group travel is on the rise again. But the industry should watch businesses like Airbnb, which has 40,000 listings just in Manhattan. Intermediaries are another concern with commission rates expanding. And look out for Google and Amazon, which will surely get into the travel business.
Huge amounts of capital are chasing hotel deals, Savills' Marc Magazine says, creating a tremendous level of deal volume this year. But according to Marc (second from left, joined by Walker & Dunlop's Andy Coleman, Allied Advisors' Richard Rudd, and Wright Johnson's Aaron Goforth), many investors are priced out of gateway markets, looking instead at secondary ones for good deals. (That's how we approach choosing a steak restaurant; second tier can be just as delicious.) On interest rates, financial guru Andy says he has no idea where they'll go. He does expect 10-year Treasury yields, currently hovering around 2.5%, to inch up to 3% by years' end.
On our lifestyle hotel panel, Salamander Hotels' Prem Devadas, RD Jones' Rebecca Jones, Marcus Hotels & Resorts' Tom Riley, independent consultant Mark Morris, and moderator and CohnReznick attorney Greg Remeikis had different definitions for boutique and lifestyle hotels, but all agreed on making the guest experience more personalized. The staff affects the experience, as well, even if the hotel is as massive as the Marriott Marquis or a small boutique. Some trends to watch: bunk beds (for some late-night hotel slumber party fun), smaller rooms, little interaction with the front desk, and boutique hotels moving into smaller cities. We have additional coverage in Real Estate Bisnow DC: Part 1 and Part 2.