ATLANTA — The volume of hotel transactions in the U.S. has been slim lately, but investors feel that's about to pick up.

In some cases, it's a double-edged sword. The reason why many of these deals will come to market is due to the overwhelming pressure brands put on owners to renovate, according to speakers at the first day of the Hunter Hotel Investment Conference in Atlanta.

"Will [property-improvement plans] be an accelerator of deals? I think to an extent, yes. If you're a holder of an asset that is tired and is starting to slide in terms of market share because of the condition, [owners] have a choice to make. I think there's going to be a lot of transactions that are driven by the condition of the asset and the [loan] maturities or debt level," said Shai Zelering, managing partner in Brookfield's Real Estate Group.

Although investors haven't pounced on hotel deals yet, it has not been because of a lack of effort or conviction on their part. Rather, it's due to the cost of capital, which is now starting to come down.

The main takeaway that investors stressed is that it's more than OK to be patient in this environment.

Hotel News Now Editorial Director Stephanie Ricca talks with Colin Sherman, director of hospitality market analytics for Texas and Tennessee, at the Hunter Hotel Investment Conference. The two recap the themes of the first day of the conference, from overall hotelier sentiment to the transactions environment. Listen to the podcast below, and find this and other HNN podcasts on Spotify, Apple or wherever you find podcasts:

“Who are the best third-party management companies we’re going to align ourselves with? With changes of leadership at the big companies like Aimbridge … and the vast array of smaller management companies selling stakes in their business and trying to grow, a big part of our priority is asking who is going to be the best local management company, the best regional management company and the best local management company that will invest in tech and invest in human capital and be able to outperform the comp set?”
— Mit Shah, founder and CEO, Noble Investment Group, on the “Wall Street Talks” panel.

“Leave it to the brands to kill something that’s good.”
— Al Patel, president, Baywood Hotels, on the “Main Street Talks” panel, about how he worries as a hotel owner about hotel brand companies launching too many extended-stay brands and potentially flooding the market with supply.

“Every industry has been disrupted. The construction industry needs to be disrupted. We’ve been talking about modular for 25 to 30 years and nobody’s quite been able to figure that out.”
— Mitch Patel, president and CEO, Vision Hospitality Group, on the “Main Street Talks” panel, calling for innovation in construction.

The first day of the Hunter Hotel Investment Conference reignited the notion that hospitality is built on relationships and understanding our peers while also helping each other reach full potential. I got a chance to participate in the AHLA "Table Talk" event, which focused on understanding and leveraging the expectations and strengths across generations in the industry.

From this session, we heard of the struggles that new people who are entering the workforce face and how longer-tenured folks are learning to meet the needs of new entrants.

When speakers on the "Wall Street Talks" panel were asked what their best piece of advice was for those entering the hotel real estate industry, each one said it comes down to "relationships."

"In those relationships, be super authentic. Have integrity; you're going to have tough conversations across the table but if you do it in the right way, you'll get the outcomes where both people feel really happy with the interaction and you're going to do business again. I would focus on that," said Scott Trebilco, senior managing director of real estate at Blackstone.

I think this is an especially needed reminder as investors begin having more conversations with each other again about acquisitions and dispositions, whether it's through off-market, relationship-based deals or highly public ones with a sea of competitors.

You never know what a simple interaction with someone could do to boost your chances in the market.
— Dana Miller, senior reporter
@HNN_Dana

Guess what? Not much industry sentiment has changed since hoteliers last gathered at a major investment conference, back in January at ALIS. Hotel transactions remain slim to none, and today I heard a lot of conversation about delayed and stalled construction projects. Speakers on the “Wall Street Talks” and “Main Street Talks” panels spoke candidly about supply-chain delays, backups from brands on things like design and more. In fact, the sentiment about brands was a little salty from the owners and investors on the main stage — more than a few jabs and pokes flew about brand proliferation. More to come? We’ll see.
— Stephanie Ricca, editorial director
@HNN_Steph

The general sentiment on the first day of the Hunter Hotel Investment Conference was neither optimistic nor pessimistic; hoteliers took a nuanced approach weighing the headwinds and tailwinds facing the industry.

Challenges such as labor and construction have lingered since the onset of the pandemic, but hoteliers can no longer lean on optimism in the future as the industry begins its second year of normalization. Hoteliers are aware that the current environment is what it is, and it’s time to stop yearning for how things used to be and start adjusting to the new landscape.

Geopolitical tensions and the U.S. economy also pose threats to the industry and are seen as potential headwinds in 2024.

But there’s still a good amount of positivity among attendees. There were a few speakers who said the transaction market is reaching an inflection point, with large transactions on the way in the second half of this year. Group and business travel demand is continuing its upward trend this year, and leisure demand is holding strong.
— Trevor Simpson, associate editor
@HNN_Trevor

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