Hotel Investors Focus on Value Enhancement Amid Challenges

With hotel sector growth projected to be modest for the rest of 2024, investors must focus on cost control and value maximization.
  • Hotel investors are optimistic, with half planning to increase investments despite challenges in securing and servicing debt.
  • Strategic due diligence can identify cost-saving and new revenue opportunities, including better Property Improvement Plans (PIPs).
  • Enhancing property efficiency and sustainability through energy and water audits can lower utility costs and attract guests.
Key Takeaways

According to CBRE, the hotel sector is expected to see modest growth through the end of the year, prompting investors to focus on cost control and value maximization after acquisitions, as reported on Globest.

Maximizing Value

Overall, U.S. investors hold a generally positive outlook on the hospitality sector, with half planning to increase their hotel investments, despite challenges securing and servicing debt.

To maximize value and secure better rates, investors can employ several strategies:

  • Integrating Property Improvement Plans (PIP) with Property Condition Assessments (PCA) to align necessary repairs with remodeling requirements, optimizing expenses
  • Reducing insurance costs and providing accurate property data, including COPE data (construction, occupancy, protection, exposure)
  • Conducting Resilience Assessments can also potentially lower insurance premiums.

Improving Sustainability

Boosting efficiencies and reducing utility costs are also vital for enhancing value:

  • Energy and water audits can identify excessive consumption and suggest reduction measures, providing installation cost estimates and potential funding options.
  • Adding solar arrays can offset electricity costs and appeal to environmentally conscious guests.

Identifying Opportunities

Identifying additional revenue streams during due diligence can also enhance property value:

  • Installing EV charging stations can attract guests with EVs and meet PIP requirements, providing a competitive edge.

Zooming Out

According to McKenna Luke, Managing Director at Partner Valuation Advisors, “Revenues have been strong over the last two years, and RevPAR in many markets has reached or exceeded pre-pandemic levels. There are headwinds, including cost of capital, wage pressures, and insurance. One key to maintaining value is being a smart operator and finding opportunities to boost revenue and to control costs.”

RECENT NEWSLETTERS
View All
Steve Ross Steps Down from Related, Launches West Palm Firm
July 12, 2024
READ MORE
Private Equity Seeks Bargains in US Real Estate
July 11, 2024
READ MORE
Powell Hints at Possible Rate Cut Amid Risks of Higher-for-Longer
July 10, 2024
READ MORE
Apartment Absorption Nears Record High in Q2
July 9, 2024
READ MORE

podcast

No CAP by CRE Daily

No Cap by CRE Daily is a weekly podcast offering an unfiltered look into commercial real estate’s biggest trends and influential figures.

Join 65k+
  • operators
  • developers
  • brokers
  • owners
  • landlords
  • investors
  • lenders

who start their day with CRE Daily.

The latest news and trends in commercial real estate delivered to your inbox. Get smarter about what matters in just 5-minutes or less.