NEW YORK — Even with all the hurdles in the way of new hotel projects, OTO Development isn’t standing still.

OTO Development co-founder and CEO Todd Turner said his development and management company is exploring opportunities and has two properties currently under construction with another in the pipeline. Outside of that, the company hasn’t signed any new projects since its newest about 14 months ago.

That comes after a busy three to four years in which OTO Development added 22 hotels to its portfolio through development and acquisitions. It has a total portfolio of approximately 70 owned and/or managed hotels.

“The bar is a lot higher because the return expectations are still there,” he said. “It’s just a much tougher underwriting process because all the inputs are strained.”

Borrowing costs are higher than they were two years ago, and construction costs haven’t decreased, Turner said. Getting lenders on board is generally the most difficult it’s been since 2009, but OTO Development has good relationships with its lenders.

“We treat them like partners because they are valuable partners for us, and our belief is we treat our partners better than we treat ourselves,” he said. “We’ve gotten in front of issues that we see coming down the road and earn a lot of respect from that lender community.”

Even so, it’s a narrow path to navigate to get both investor and lender interest and have the deal pencil correctly, Turner said.

Still, OTO Development’s investors have a long-horizon view of the industry, he said. The company doesn’t hold on to hotels for five years and then flip them.

“We know that great real estate is what we’re after, and we’re going to deploy when the right opportunity comes around,” he said.

OTO Development has two hotels under construction, Turner said. The AC Hotel Naples is expected to open in South Florida in December, and the AC Hotel Jacksonville East will open in November. It has another project under development in Long Island that may start next year.

The addition of 22 hotels to its portfolio over the last several years was due in part to a shift in strategy that started six to seven years ago, Turner said. Previously focused only on development, the company started acquiring hotels to gain access to some markets that would otherwise be nearly impossible to enter, such as Key West, Florida.

The team figured out how to buy an existing hotel and create a lot of value by pulling three levers: a transformational renovation, a brand change and a management change.

“If you could do all three of those things, which we’ve done several times, it’s been really remarkable in the value creation,” he said.

OTO Development's hotel portfolio has a good geographic and demand base mix, Turner said.

It had previously focused on core gateway cities with corporate demand bases, but it expanded its strategy about six years ago to include leisure-driven markets. It currently has 17 hotels in predominantly leisure-driven markets, and 11 of those are on beaches. Seven have a mix of corporate business on weekdays and leisure on weekends.

“We like that demand dispersion that has buffered us and protected us,” he said. “This is going to be a great strategy going forward.”

OTO Development recently reopened two hotels over Memorial Day weekend, Turner said. One was the 100-room Beal House Fort Walton Beach, Tapestry Collection by Hilton, on Okaloosa Island, the company’s first soft-branded hotel. It’s a 25-year-old hotel that operated under a Best Western brand. It also opened the 170-room Hilton Garden Inn Ocean City Oceanfront on Maryland’s coastline.

Earlier this year, the company received a conversion of the year award from Hilton for its transformation of a Howard Johnson hotel in St. Pete Beach, Florida, into the Hilton Garden Inn St. Pete Beach. It was a hotel built in the 1970s with a beach bar and an on-the-street restaurant. There’s roughly 20 miles of beach there with only a few other hotels nearby with no land available to build something new.

“The truck comes from finding the right submarket, the right brand, the right opportunity,” he said.

OTO Development is getting into its renovation cycles, Turner said. Its hotel portfolio is relatively young, but it has four or five hotels that will start its seven-year property-improvement plans this year.

One of its oldest is the Hampton Inn Manhattan/Times Square Central, which is about seven years old.

"That has run high [90%] occupancy since it opened pretty much, and our team has done a great job of keeping it up, but it's time for a big, big renovation," he said.

Turner has served as the company’s CEO for nearly a year now. He stepped into the role after Corry Oakes, co-founder and CEO of the company since 2004, died Aug. 7, 2022.

“The industry lost an influential voice, and our company lost a founder and leader and head coach,” Turner said. “I lost, as well as thousands of other people lost, a dear friend.”

While dealing with their loss, the team at OTO Development locked arms and kept moving forward, showing their dedication and professionalism, Turner said. Oakes built the team and set his vision, modeling principles that are still intact today. The company has one of the strongest select-service portfolios in the country, he said.

“My main objective is to stay on the path that we’ve set because it’s been working really well,” he said.

The goal is to always improve and learn from mistakes made along the way, Turner said. That can mean changing strategies, adding new ones and discarding ones that don’t work. The company will remain focused on evaluating the industry environment, markets and opportunities and react to make the best investment and management decisions possible.

“It's been quite an adjustment and emotional thing,” Turner said. “It still is, and we all miss him terribly.”

Despite the work commitments he had, Oakes would give freely of his time to help others, Turner said. It was an amazing thing to see his energy and drive to help with big and small things.

“I was lucky to have had him as a friend and partner for as long as I had,” he said.

Read more news on Hotel News Now.