GlobeSt.com
08/24/15

Unique Issues Impact Hotel Performance
By Carrie Rossenfeld

http://www.globest.com/news/12_1181/orangecounty/hotel/Unique-Issues-Impact-Hotel-Performance-361016-1.html

IRVINE, CA—Hotel owners have to deal with a myriad of issues that most commercial real estate investors don’t face, such as union labor, minimum-wage issues, ADA regulations and a host of others, Atlas Hospitality Group president Alan Reay tells GlobeSt.com. After the release of the firm’s mid-year California hotel-sales survey, we spoke exclusively with Reay about what it takes to be successful in the hotel sector.

GlobeSt.com: What qualities do the most successful hotel investors have?

Reay: First and foremost, it is management skills or having an association with a skilled hotel-management company. Second, it is knowing your product and market so you have the ability to move quickly when the right hotel becomes available for sale. Last but not least is capital and the ability to move on a purchase with very short contingencies, which can put you ahead of the other buyers trying to acquire.

GlobeSt.com: What are the most popular types of hotels for investors today?

Reay: This falls in to two main categories: 1. trophy hotels in “A” locations and 2. upper limited-service hotels, 10 years or newer, e.g., Hilton/Marriott brands. Examples are Residence Inn by Marriott, Courtyard by Marriott, Hilton Garden Inn, and Hampton Inn & Suites.

GlobeSt.com: What factors affect hotel volume the most today?

Reay: Numerous factors including increasing revenue per available room and profitability, which is on an upward trend; historically low interest rates and availability of loans; lack of new hotel supply; foreign investment (especially on the West Coast from China), where the U.S. is seen as a “safe” haven; rapid growth of U.S. hotel REITs; 1031-exchange buyers; and investors moving out of other commercial product into the hotel sector, where they see the returns and potential upside as much greater than in their existing product field.

GlobeSt.com: What else should our readers know about hotel investment?

Reay: Hotels are extremely management intensive, and unless you have the right team in place, it can be challenging. Investors also have to understand that hotel owners have to deal with a myriad of other “issues” that most commercial real estate investors do not face, such as union labor; minimum-wage issues targeted specifically at the hotel industry, e.g., Long Beach/Los Angeles; ADA regulations; workers’ compensation; franchise; and the ever-changing property-improvement plan requirements.