Hunter Day One: Hoteliers are on the hunt for deals
 
Hunter Day One: Hoteliers are on the hunt for deals
22 MARCH 2018 8:39 AM

Editors recap the opening day of the 30th annual Hunter Hotel Conference with takeaways, quotables and more highlights from the event.

ATLANTA—Wednesday marked the opening of the 30th edition of the Hunter Hotel Conference, and much of the day’s conversation revolved around how hoteliers want to do transactions, but deals aren’t so easy to find.

Rather than debate whether the industry is at the end of its cycle, conference speakers focused more on the opportunities hoteliers have to grow their businesses. With many owners looking to buy and comparatively few looking to sell, panelists seemed to agree it’s a sellers’ market at the moment.

“There’s a really a lack of product,” said Noble Investment Group CEO Mit Shah during the “State of the industry” panel. “I think we’d all say we want to be net (buyers), but maybe it’s a good time to be net sellers.”

Day One recap video

Photos of the day

Debby Cannon (left), director of the Cecil B. Day School of Hospitality Administration at Georgia State University, commended Bob Hunter, conference host and CEO of Hunter Hotel Advisors, on 30 years of the Hunter Hotel Conference. “Each year, it’s a wow,” she said. “It gets better and better.” (Photo: Stephanie Ricca)
Referencing a similar moment from IHIF, Wyndham Hotel Group President and CEO Geoff Ballotti hands out La Quinta socks, while Choice Hotels International President and CEO Pat Pacious politely declines. (Photo: Sean McCracken)

Quotes of the day
“We may be U.K. listed, but we’re America big.”
—Elie Maalouf, CEO, Americas, InterContinental Hotel Group, describing his company’s unique position as a London-based company with a huge presence in the U.S., including iconic American brands like Holiday Inn.

“You don’t want fat; you want muscle.”
—Maalouf, on how IHG is growing following its 2017 launch of Avid Hotels and recent acquisition of Regent Hotels & Resorts.

“I consider hotels to be one of the most underdemolished real estate classes.”
—David Marvin, president and CEO of Legacy Ventures

“The thing that is keeping me up at night really is rising (labor) costs, with a focus on people. And I think the answer to that, and really this is addressed to the owner/operators in the crowd, is take care of your people. … You need to recognize the performance of your people, and if you provide fulfilling jobs with those attributes, I think that you stand to keep your good people.”
—Marvin

“The refinancing market is white hot. Sellers are refinancing rather than selling.”
—Tyler Morse, CEO of MCR

Tweet of the day

Editors’ takeaways

Predictability was on the minds of speakers at Wednesday’s opening session. Whether it was the consistency of brand standards, the necessity of understanding industry fundamentals or the ability to project how long a hotel cycle lasts, there was plenty of talk about the importance of predictability.

The select-service segment was in the spotlight for most of the day as franchisors, owners and investors sang its praises. Its performance has led select-service hotels to become sought-after assets among institutional investors. That alone creates a predictability that warms the hearts—and wallets—of investors of all shapes and sizes.

“Select-service is much more consistent,” said Mit Shah of Noble Investment Group.

But even predictable things must change. For example, Rockbridge CEO Jim Merkel talked about how he no longer looks at replacement costs as instrumental in the decision-making process of an acquisition.

“It’s really a function of the cash flow and the cash-flow potential of that asset,” he said.

Also predictable in the current environment is the ability to raise funds. Rockbridge, Noble, MCR and Starwood Capital Group were each represented on the “State of the industry” panel, and each has just completed or is in the process of raising funds to acquire assets.

King of the hill is Starwood Capital’s $7.5 billion real-estate fund, which will include hotels as one of the asset classes it acquires.

“Certainly you’re nervous about (spending that much money),” Starwood’s Suril Shah said—but he quickly added that there are many assets out there to invest in. Starwood’s plans include developing more of its own 1 Hotel brand.

That’s probably the most predictable aspect of the hotel space—no matter what happens, more supply will be added.
—Jeff Higley, Editorial Director
@jeffhigley1

Bob Hunter, conference host and CEO of Hunter Hotel Advisors, kicked off the first day of the Hunter Hotel Conference with a lot of optimism, talking about favorable tax and interest rate environments, among other factors. He cited numbers showing that owners in the audience are planning to develop hotels this year. Though maybe a little less than in years past, it’s still more than half. And a very high number said they’re planning to finance hotels this year.

The “Presidents’ panel” on Wednesday afternoon touched on recent M&A activity among its speakers. Of the four panelists on the stage, three—the executives from the brand conferences represented—had made significant acquisitions over the last year or so, with one example within the last week: Wyndham Hotel Group CEO Geoff Ballotti talked about the company’s in-progress acquisition of La Quinta’s management and franchise business; IHG CEO of the Americas Elie Maalouf talked about the company’s recent acquisition of Regent Hotels & Resorts; and Choice Hotels International President and CEO Pat Pacious talked about the company’s 2017 acquisition of WoodSpring Suites.

Why and how do franchise companies continue to seek M&A? The “why” is about continuing to get scale, the executives said, and the “how” differs from company to company.

It’s March Madness season, and Maalouf underscored IHG’s “how” with a basketball analogy: “You have to hang around the hoop and wait for the ball to come your way, but you have to have strategy,” he said.
—Stephanie Ricca, Editor-in-Chief
@HNN_Steph

Ubiquity is a powerful driver of a business’ success. This isn’t a ground-breaking revelation, but it’s an interesting one nonetheless coming from Coca-Cola Company Chairman Muhtar Kent, who started his remarks Wednesday talking about the business strategy of making sure one of his company’s products is always within “arm’s length of desire.”

For a fragmented industry that openly craves the power of scale, the type of ubiquity you see with Coca-Cola products seems like a dream, but that company’s existence proves it’s attainable. So that leaves the question: What does a hotel company have to do to become this industry’s equivalent of Coke? You can assume Marriott is the closest thing at the moment, but its market share pales in comparison to the soft-drink giant.

Kent made the observation that the company’s seeming omnipresence isn’t just the product of strong consumer marketing, which it absolutely has, but also an unrivaled distribution system. Obviously, distribution takes on a different meaning in the hotel industry, but that tidbit does serve as a necessary reminder that hotels need to up their distribution game so they are always within the metaphorical arm’s length for travelers when that moment of desire strikes. Coca-Cola is the king of distribution in its space. Any hotel company that wants to replicate that success needs to similarly own the distribution space, which is a huge but possibly worthwhile undertaking.
—Sean McCracken, News Editor
@HNN_Sean

It is more important now than ever for owners and brands to remain nimble towards the constantly shifting landscape of the hotel industry. It’s about capitalizing off of forward-looking indicators, such as a rise in corporate profits, which are mostly coming from the recent tax cut. And not to beat a dead horse with the word “experiences,” but that remains a crucial theme. Currently, brands are spending a lot of time studying the rise of baby-boomer travel. Baby boomers are ready to spend their time and money on leisure travel, which means brands can’t pass that up and must take action on creating more unique experiences. Executives are stressing the need to constantly stay relevant and look at new entrants on a weekly basis—but careful not to view them as threats and more as lessons.
—Dana Miller, Associate Editor
@HNN_Dana

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