Trinity Investments, a private real estate investment firm based in Honolulu, is chasing deals where it can add value to underinvested hotels and resorts.
Craig Lovett, senior vice president of development at Trinity, said there are a significant number of hotels that were underinvested during the pandemic.
Some owners are now in a position where the renovation is too big of an undertaking or too costly for them to put their arms around, he said.
"We see opportunities certainly in the marketplace of assets like that where existing owners haven't got the sophistication or the risk profile to take on such a refurbishment burden, which is perfect for us; that's exactly what we want. That's what we run towards not run away from," he said.
A majority of deals that Trinity pursues are off-market, and potential sellers are being more selective about who they transact with, he said.
Though Lovett's role is in development, he said everyone at Trinity is involved at the acquisition table.
"We have to dig in, and some of the deals that we're freeing up now ... a lot of that has been because of the fact we're willing to do the hard work and actually get deep on understanding the real capital cost involved in respositioning, having the in-house skills to do that and portray that confidence to our partners, whether it be equity partners or lenders," he said.
As of December 2023, the firm has approximately $5.4 billion of assets under management. Trinity's services include property investment, redevelopment, value-enhancing asset management, operations and repositioning, cross-border finance and tax strategies, according to its website.
Lovett said it's already apparent that there's more conviction among investors to acquire hotels as transaction activity is growing.
"When the basic fundamentals of interest rates align, there's certainly going to be more competition out there. Are there large, iconic opportunities out there [that are in our wheelhouse]? Yes, there's more than one that we're chasing at the moment."
Iconic resorts that Trinity has invested in include the 1,000-room Diplomat Beach Resort in Hollywood, Florida, which it bought in February 2023 for $835 million and is converting from a Curio Collection to a Signia by Hilton; the $80 million renovation of its JW Marriott Phoenix Desert Ridge Resort & Spa that Trinity purchased in 2019 for $605 million; and the $160 million renovation of its Westin Maui Resort & Spa, Ka'anapali, that the firm purchased in 2017 for $317 million.
Lovett said what he's most excited about with the Westin Maui's final phase of renovations is the addition of a $10 million social entertainment space in an underutilized part of the hotel. The space includes a bowling alley, golf swing suites, a full bar and kitchen and virtual reality area.
"For a hotel like that where we have a group base that we want to grow and a great leisure base that sometimes needs something different than the beach, it's a great opportunity. We probably will look [at doing something similar] at other hotels as well," he said. "There are a lot of initiatives that we're looking at that add something different, whether it be a small movie theater or something different to the property that really draws that bleisure traveler."
Trinity has eight properties that are in some stage of renovation now, Lovett said.
Going forward, his team sees more opportunities to reposition existing assets in North American markets rather than executing new-build development.
Managing Supply-Chain Disruption
While a majority of the pandemic's effects on supply chain have eased, the current Red Sea shipping crisis is causing disruption and increasing freight costs.
"That's a whole new issue now. It's certainly not to the degree of what we've experienced from COVID but it is impacting, no doubt. I would say that from a container perspective, you're probably looking at $3,000 to $4,000 additional per container that we're getting charged at the moment just to be able to secure containers, and there's delays," he said. "Really in the last six months, we've gone into this period of cautiousness again and a little bit of an uncertainty of being able to book containers. It all happened around the same time as Chinese New Year, so a lot of us are waiting to see [what recovery looks like.]"
Trinity has worked to establish relationships with manufacturers, including ones with their own factories that Trinity can negotiate directly with rather than through a representative.
"The truth is, are you priority one or are you priority two? The most important thing for us is that service providers and vendors [feel we are the] the most important client for them," he added. "If you have the skills and connections to be able to go direct and be a priority, that's the key to navigating all these issues and getting decent costs."
Anything an owner or developer can do to gain control of costs, quality and scheduling is beneficial, he added. Trinity is going to examine internal strategies to get closer to the process in-house.
It's a balance between that and respecting third-party partners, he said. Some third-party providers aren't delivering the same quality they were pre-COVID.
Luckily, Trinity has a suite of trusted interior designers that it consistently partners with. The firm has also used the same project manager for a majority of its projects.
"I don't think we would ever pull in in-house design, for example. You need a variety of design. Each hotel needs its own identity; each brand needs its own identity. I think it's important to keep some optionality. Maybe there is a small in-house design [team] that does certain things?" he said.
"We honor our providers," he added. "The more they value you, the better they'll do for you."