TEMPE, Arizona — Hotel investors have put a lot of time looking into potential deals in the first half of 2024 and considerably less time closing them. But a group of experts in the field say there are early signs that the transactions environment could be much better in the back half of the year.
During the "Investment Insights" session at the ALIS Summer Update conference in Tempe, Arizona, Keith Oltchick, chief development officer for Remington Hospitality, said his company's hotel investment partners have been "spending a lot of time looking at more deals" but so far "haven't gotten anything done.
"They're busier now getting nothing done than they've ever been," he said. "But I think it's good that they're looking at things.
Akshay Goyal, president of Riller Capital, said he has some degree of optimism as he sees more willingness to compromise from both potential buyers and sellers.
"I feel like the worsening fundamentals and the fact that there are, let's just say, certain over-levered assets which haven't seen capital in a long time, they're running out of time to extend," he said. "Sellers are also getting closer to maybe some capitulation. ... On the buying side, spreads are getting tighter."
Both Goyal and Tamarack Capital Partners CEO Heather Turner said their firms have been unable to do recent deals because of that gap in the marketplace but are optimistic it will continue to close and make transactions more realistic going forward.
Turner said part of that is better recognition when there's a real deal to be had as opposed to when a potential seller is more interested in finding the market value of an asset rather than selling it.
"The deals we've been focused on, the deals we've spent the most time on — even though we haven't closed a deal this year on the transactions side but we've sold something — has been those where we know there's a market seller on the other side," she said.
She said in the current market, it helps to look for deals that are either lender-facilitated or with a seller that is "well-known to be willing to meet the market" on pricing.
"Those are the types of places that we have been spending time, and because of that we have found that we're looking at a broader category of assets," she said.
It's important to be careful when looking at potentially distressed assets because even though there's some assurance there's a motivated seller, they also might be problematic assets for other reasons, Goyal said.
"Sometimes distress is distressed for a reason, and we wouldn't want to get involved in that distress either," he said.
He said his company is primarily approaching opportunities through the lens of what market they sit in because that's such a big determining factor of future success.
"We think fundamentals are very bifurcated in the U.S., and while we may see 2% [revenue per available room] growth nationally, it's going to be more plus 6% or minus 6% rather than 2% consistently," Goyal said.
It's still going to be a while before many firms are comfortable buying in troubled West Coast markets such as San Francisco, Portland and Seattle, Turner said.
"It's probably still too early in some cases because we think the duration to a really robust recovery is still fairly long," she said.
But Goyal added there's still a path to success in markets like San Francisco if owners are able to buy in submarkets with strong fundamentals.
"We've spent time trying to figure out assets we can buy there, and I think it's really just finding pockets within those cities," he said.