ATLANTA — Whether it's a good time to buy in the hotel industry depends on what street you're standing on.
While Wall Street investors remain hesitant to jump back into hotel deals, their Main Street counterparts are not only ready, but active and willing to take some risks.
"My dad didn't have a high-school education when he bought a hotel in 1980 and interest rates were high, and he still created value," said Azim Saju, CEO of Ark Holdings Group. "My simple view of our business is, get deals done. There will always be reasons not to — high gas prices, geopolitical uncertainty. But if there wasn't a risk component, there would be no reward."
Ark Holdings third-party manages 80 hotels, and its development division owns 16 hotels and currently has five hotels under construction with a few more under contract for acquisition, Saju said.
Neil Amin, CEO of Shamin Hotels, echoed the risk versus reward mindset that smaller, more nimble owners can have.
"Growth is a necessary positive," he said. "If you're too cautious, you miss out on the best opportunities."
Shamin is an owner, operator and developer of hotels, with 60 hotels in its owned portfolio, according to CoStar. Amin said the company has eight hotels in its development pipeline and is eyeing a few more to buy.
Amin and Saju joined other hotel owner-operators on the "Main Street Talks" panel at the Hunter Hotel Investment Conference.
Most said they're weighing the pros and cons between building and buying carefully right now.
Concord Hospitality, an owner-operator company with select- and full-service hotel brands across the country, has seven hotels under construction, Concord President and CEO Mark Laport said.
"It's not a wide-open crazy market as a buyer, but we feel it's getting better," he said.
Amin said his company's owned portfolio is evenly split between hotels it has bought and hotels it has developed, and has built more than it's bought since the pandemic — an unexpected course of action, he said.
"After the pandemic, there is a big delta between new and old hotels from the traveler's perspective," he said. "New and even renovated old are not the same."
He said he sees a big performance difference between new-build hotels and even fully renovated hotels in the same market, which "emphasizes our plans to develop more."
Speakers agreed that new-build hotel deals can seem much more savory when owners consider the headache and costs associated with property-improvement plans and other renovations.
"Renovations, if done right, can get you there and your basis usually is lower," Saju said. "But you'll go through the pain. Change-of-ownership PIPs have become really, really painful."
Laport pointed out that from his perspective, today's cost challenges mean that "re-outfitting a room is 40% more costly than it was four or five years ago."
Get the deal done
Saju said "the risk is real" when it comes to pursuing hotel deals today and keeping an eye on cap rate is key.
"We beat up every deal pretty good and make sure we're very comfortable on the exit cap rate and are not inflating that number," he said.
While he said it's been necessary to adjust cap rates based on interest rate in the markets where Ark operates, Saju said the company isn't overly aggressive when making assumptions for underwriting.
Laport said it's easier this year to meet buyer expectations than it was last year.
"This compression of cap rates from a seller's standpoint is getting closer to buyer expectations," he said, adding that Concord has a few deals under contract.
Concord has "attacked" lower-tier extended-stay hotel development for the last few years, Laport said, doing ground-up deals in what he called "high-growth markets" like Raleigh, North Carolina; and Phoenix.
Brian Quinn, chief development officer for Sonesta International Hotels, said all types of buyers are showing interest now, even in larger deals. He teased a 114-hotel portfolio, valued at more than a billion dollars, that Sonesta investor Service Properties Trust is set to close on in the coming months.
"There is a market out there. It was a very robust process, an incredible group of bidders. ... Bidders were venture capital, private equity, institutional buyers, small, large."
While the deal is not closed, Quinn said the excitement among serious bidders proved an appetite and willingness to invest in hotels.
"There are people who want to do it smartly," he said. "I believe in what we've said about resiliency and being first movers and taking the risk."
Geopolitical worries
Main Street investors share the worries Wall Street investors have over general political and economic uncertainty, not in small part because most operate hotels as well.
Laport said that it's so difficult now to forecast for the unpredictability incited by U.S. government moves.
"We have hotels in Canada that I didn't worry about before, and now I do," he said.
Many of the hotels in Shamin's management portfolio are in Virginia, a big state for government business. Amin said those hotels have received many cancellations for conferences and events in 2025.
But the owner side of him sees the opportunity, he said.
"This is our chance to buy some great assets in D.C.," he said. "It's not going anywhere; it's still the capital of our country. We're contrarian. We go against the flow and develop when others are not and buy when others are not."