Hotel Management April 21, 2015 : Page 1

■ ➔ SUPPLY SIDE .. pulse 7.7 percent 7.6 percent 7.4 percent 1.2 percent Source: PKF-HR U.S. hotel markets with greatest change in supply forecast from 2014 to 2015 The Leading Hospitality News Authority Since 1875 HotelManagement.net Vol. 230, No. 5 | April 21, 2015 A Questex Hospitality Group Publication New York Austin Pittsburgh National Average SEE PAGE 16 FOR MORE TRENDS & STATS CROSS-BORDER INVESTMENT U.S. hotel market braces for in ux of FDI By David Eisen EDITOR-IN-CHIEF HERSHA HOSPITALITY Hersha Hospitality Trust sold the 70-room Hotel 373 in Manhattan last year to a Chinese investor for $37 million. N ATIONAL R EPORT – Foreign direct investment in the U.S. lodging segment is intensifying and show-ing no signs of let up. And what began with invest-ments in hotel companies—think Hong Kong’s New World Hospitality buy of Rosewood Hotel Group—is now shifting toward hard assets—Chi-na’s Anbang Insurance Group acquiring the Wal-dorf Astoria, for example. “International capital is seeking protection against downside risk in other parts of the world,” Neil Shah, president and COO of Hersha Hospitality Trust, a publically traded REIT, told Hotel Management , referring to the quality, liquidity and strength of the U.S. hotel market, particularly in gateway cities. “Capital is owing to those opportunities.” See Foreign investment | page 35 Cost effective, pro table top limited-service hotel appeal By Bruce Serlen Now a public company, La Quinta continues to grow its distribution, including the 15-month-old La Quinta Inn & Suites Houston/Willowbrook. CONTRIBUTING EDITOR LA QUINTA N ATIONAL R EPORT – With op-erating fundamentals strong across all industry segments, limited-service continues to be Page 20 a solid performer. e segment enjoyed ADR growth of 3.9 percent in 2014, year-over-year, not quite scaling the heights of the luxu-ry segment, which saw ADR growth climb 5.6 per-cent, according to STR. “But limited-service/midscale occupancy in 2014 See Limited-service | page 37 SEE RELATED SURVEY: ◾ How do the limited-service chains stack up? ONE – on – ONE Chelsea Hotels’ EDWARD SCHEETZ This CEO has made a career out of focusing on the boutique landscape | See page 18 ■ ➔ TRENDS & STATS. Record highs inside this issue TECHNOLOGY. HOTEL OPERATIONS. Front and center How the front desk receives and welcomes guests is the moment of truth that can last a lifetime. PAGE 26 Into the cloud A cloud-based PMS can dramatically change the way hoteliers conduct operations. PAGE 24 In 2014, the 59 top markets PKF covers achieved their highest occupancy levels since 1988. PAGE 16

Cross-border investment

By David Eisen, Editor-in-chief

Cross-border investment
U.S. hotel market braces for influx of FDI

By David Eisen
editor-in-chief
National Report – Foreign direct investment in the U.S. lodging segment is intensifying and showing no signs of let up. And what began with investments in hotel companies—think Hong Kong’s New World Hospitality buy of Rosewood Hotel Group—is now shifting toward hard assets—China’s Anbang Insurance Group acquiring the Waldorf Astoria, for example.
“International capital is seeking protection against downside risk in other parts of the world,” Neil Shah, president and COO of Hersha Hospitality Trust, a publically traded REIT, told Hotel Management, referring to the quality, liquidity and strength of the U.S. hotel market, particularly in gateway cities. “Capital is flowing to those opportunities.”
Last year, Hersha sold the 70-room Hotel 373 in New York to China’s Fantasia Holdings for $37 million.
And it’s coming in spades from China, facilitated not only by the government’s regulation reform in how companies can deploy capital overseas, but also due to a stagnating economy and currency shifts.
As the yuan depreciates against the U.S. dollar (it lost 2.5 percent in 2014), many Chinese companies, particularly insurance companies, have set their sights overseas on the property markets, with New York squarely in their sights.
According to JLL, offshore investors poured $1.9 billion into New York hotel transactions in 2014, accounting for 50 percent of total transactions in the city. This year, JLL expects transaction volumes in New York tied to offshore capital to reach $3 billion.
While much of the new capital is flowing from Chinese investors—they could account for $5 billion worth of global hotel sales in 2015, according to JLL—other investors, from Qatar, Bahrain, Kuwait, Malaysia and Singapore, to name some, are also moving into the U.S. hotel sector.
The Big Apple isn’t the only city in on the action. Other top MSAs are in play, as well, seen as safe havens for overseas capital. “We’ll see more foreign capital come to the U.S. for hotels,” said Mike Bellisario, senior research associate at Robert W. Baird & Co.
Hotels remain a risk/reward play for investors. “There is a great benefit to real estate investments by coupling returns/going-in yields, which are greater than most countries’ treasury yields,” said Jay Morrow, VP at Hodges Ward Elliott. “Further, hotels are typically on the highest end of the cap-rate spectrum due to their perceived risk. There are likely investment windows that shift from country to country regarding their investments as laws and regulations on both sides change.”
Meanwhile, the action isn’t only in trophy assets. Overseas investors are more and more tempted by the yields provided by select-service hotels. “The big news for 2015 and 2016 is we’ll see more coming for yield-oriented select-service hotels in global gateway markets,” Shah said.
One of the more pressing questions is how FDI will impact asset valuations here in the States and whether it will make for added competition to U.S.-based REITs and private equity.
“As an owner of hotels in gateway markets, [FDI] is a positive; it increases property values and introduces more liquidity,” Shah said. “As an acquirer, it does make it more challenging to identify and find opportunities, but the lodging market has been taking in new entrants for the last decade as the industry got more institutional and securitized. It’s adding another player to the party. Net-net, it’s a positive for hotel REITs.” ■HM
deisen@questex.com

See Foreign investment | page 35

Foreign investment

Hersha Hospitality Trust sold the 70-room Hotel 373 in Manhattan last year to a Chinese investor for $37 million.

Hersha Hospitality

Work has begun on Fig Central in Los Angeles, a $1-billion project spearheaded by Chinese developer Oceanwide Estate Group.

RTKL

Read the full article at http://www.hotelmanagementdigital.com/article/Cross-border+investment/1984206/254385/article.html.

Cost effective, profitable

By Bruce Serlen, Contributing editor

Cost effective, profitable top limited-service hotel appeal

By Bruce Serlen
Contributing editor
National Report – With operating fundamentals strong across all industry segments, limited-service continues to be a solid performer. The segment enjoyed ADR growth of 3.9 percent in 2014, year-over-year, not quite scaling the heights of the luxury segment, which saw ADR growth climb 5.6 percent, according to STR.
“But limited-service/midscale occupancy in 2014 grew 4.3 percent, compared to the luxury segment’s gain of a much more modest 0.9 percent,” said STR SVP Jan Freitag.
At Marriott International, RevPAR in the fourth quarter of 2014 for limited-service hotels in North America jumped 8.2 percent, compared to the same period a year ago. This includes such legacy Marriott brands as Courtyard, Residence Inn, SpringHill Suites and Fairfield Inn & Suites. Also tucked into the category are Marriott’s two extended-stay brands, Residence Inn and TownePlace Suites.
By comparison, RevPAR during the fourth quarter for the company’s full-service hotels in North America grew 6.7 percent, compared to the prior year, a healthy showing, but still 1.5-percent lower than the growth seen in the limited-service sector.
Given that limited-service properties are typically franchise operations, it should come as no surprise that franchise fees for the last three months of 2014 increased 13 percent, compared to the same period in 2013, boding well for 2015.
On the transactions front, the market for limited-service hotels remains vibrant. “The year 2014 was actually dominated by the transactions activity of limited-service/select-service hotels, relative to other industry sectors,” said HVS Senior Managing Director Suzanne Mellen, drawing on data from Real Capital Analytics.
At Hyatt Hotels Corp., the company sold a total of 46 hotels during the fourth quarter of 2014. Of these, 43 were either Hyatt Place or the company’s extended-stay offering, Hyatt House. In each case, the new owner of the property retained the Hyatt flag. “Last year was a very successful one on the transaction and recycling [of assets] front,” said President & CEO Mark Hoplamazian.
For potential buyers, investors and developers, the appeal of limited-service assets can be summed up in two words: “cost effective.” These projects are cost effective in terms of cost to build vis-à-vis the cost of full-service properties. And they’re cost effective to operate in terms of the amenities package, food-and-beverage offering and labor model, again compared to full-service.
Looking ahead in the short term, STR’s Freitag forecasts “relatively healthy RevPAR growth industry-wide for 2015 and 2016. Overall, it’s very smooth sailing.”
“We’re forecasting that in 2015, RevPAR in the limited-service/midscale segment will grow 5.2 percent compared to the same period last year. By contrast, RevPAR is scheduled to grow 6.1 percent in the luxury segment this year and an even better 6.3 percent in the upper upscale,” he said. ■HM
hm@questex.com

See Limited-service | page 37

Limited-service

SEE RELATED SURVEY:
◾ How do the limited-service chains stack up?
Page 20

Now a public company, La Quinta continues to grow its distribution, including the 15-month-old La Quinta Inn & Suites Houston/Willowbrook.

La Quinta

Waramaug LS Hotels acquired the 122-room Courtyard Daytona Beach Speedway/Airport, in Florida, late last year.

Marriott International

Read the full article at http://www.hotelmanagementdigital.com/article/Cost+effective%2C+profitable/1984207/254385/article.html.

Next Page


Publication List
Using a screen reader? Click Here