Predictions for hospitality investment in 2018 - Insights

Predictions for hospitality investment in 2018

hotel investmentThe last week of January, the 22 through the 24th to be exact, is one of the most important weeks in the lodging industry; ALIS 2018.Ê ALIS is the acronym for American Lodging Investment Summit.Ê It is the week when brilliant financial minds convene with innovative hospitality gurus to orchestrate blockbuster deals.Ê

I like to refer to ALIS as the ÒDavosÓ (World Economic Forum) of the investment lodging sector, ALIS is the largest hotel investment conference in the world; attended by nearly 3,000 hotel industry professionals and investors.Ê While the agenda centers on education (current trends) and networking, the predominant focus during the conference is investments.Ê In other words, deals!

ALIS in my opinion, is the preeminent lodging investment conference in both the real estate and hospitality industries. It is not for the faint of heart, neophytes, ill-prepared or aspiring deal makers. ALIS is the Super Bowl of deal making conferences, the best in class show up and capture The Ring.

This year’s ALIS conference is extremely important as it is taking place during a new administration in the United States and at the start of a new year in which the stock market is soaring, with good economic numbers and the passage of a new tax plan. The overall temperature at the conference will surely be optimistic and hopeful for growth in the hospitality sector.

ALIS 2018 will most certainly set the tone for the lodging investment sector for the entire year. The players are prepared and ready to go. Predictions will become realty post conference as all head back to corporate to ink deals.Ê So, what are the predictions for ALIS 2018?Ê We are sharing our predictions based upon our clients’ and partners’ interests, investment strategies and current deals.

So, here are the trends for hotel brands we expect will emerge post ALIS:

1. Expansion, expansion, expansion Ð Growth in European/international markets

Nothing new here as hospitality brands have all experienced strategic growth the past few years. The trend to watch is the competition for management contracts and flags.Ê Specifically watch the smaller brands in the four and five-star categories; brands not as well known domestically. ÊWhat is interesting is that the smaller brands are aggressively pursuing top tier markets/city centers in Europe and other international markets and are not limited to U.S. domestic properties.

Assets/real estate

The brands are no longer investing in actual real estate, in some instances they are divesting (selling off assets in smaller markets that are under-performing). It is a well-known fact that management contracts represent significant revenue and positively impact the bottom line.Ê So, why hold real estate?

There will be extreme competition among the 4 and 5-star brands, not as widely known, to secure such contracts.Ê The challenge for these brands will be operations Ð operations in new and international markets in which they do not have experience or resources.Ê Investors ultimately select bands based upon strong operations, distribution, production, revenue management, ADR, occupancy, and RevPAR achieved.

2. Funding brand expansion

We will see in 2018 strong interest in brands from the investment community enabling 4 and 5-star hospitality brands to expand exponentially. The appeal for the investors will be brands’ portfolio of assets, performance (profit), name recognition (brand awareness) and operations/management (in all segments).Ê Strong operations and distribution is perhaps the most important of all criteria for investors. After all, Ôheads in beds’ is the name of the game (ROI). The desire to simply expand is not enough; numbers (performance) and operations will seal the deal.

3. IPO (Initial Public Offering)

ÊThere will be several significant IPOs within the hospitality industry in 2018.Ê These deals will be remarkable; creating and expanding market share (domestic and international), extraordinary in size (minimum $200m+).Ê We predict a groundbreaking deal, the Mother of all deals, setting trend for the year.Ê Look for the unlikeliest of hospitality products to be offered publicly, creating a new ÒnormalÓ in both the hospitality and investment communities.

4. Operating companies (Management)

2018 will be a boon year for management companies as IPO’s are executed, investors enter the market to invest in brands.Ê There will be a need for strong Management Companies to expand their businesses, in some cases managing alongside brands. It is an opportunity to manage the assets on behalf of investors entering the hospitality market for the first time via investment in a brand, acquisition or IPO.Ê Boutique management companies which results-oriented, creative, hands-on and with strong track record will realize significant great gains in contracts.

5. Hotel residential/timeshare fractional

We predict continued growth in the hospitality residential, timeshare and fractional segments. Specifically, conversions of existing hotel assets (key feeder markets) to fractional and timeshare. Creation of hotel residences will continue; however, we predict there will be offerings in the four-star category, expanding the market beyond the five-star category.Ê The target investors will be younger travelers and corporations!Ê Yes, corporations.

About the author

Trica Jean-BaptisteTrica Jean-Baptiste is the founder and President of Morgensheer Hospitality, Inc., a New York-based consortium of seasoned in Hospitality, Real Estate Sales Advisory, Hotel Turn Around and Management Operations, International Investment Advisory, Revenue Management, Global Development Management Strategy, Resort Real Estate, Resort Development and Operations, Construction Management Development, Architecture/Interior Design, Valuation, Marketing Communications, and representing Development and Capital Markets operating as one entity.ÊThe Morgensheer Hospitality Inc. Consortium, provides strategic hospitality services to real estate investors acquiring and developing hospitality assets.

As Real Estate and hospitality professionals, Morgensheer Hospitality Inc. enjoys a front row seat to investment trends, i.e., appetites of investors interested in the hospitality industry (globally).Ê And there are times when we SET trends based upon market studies (travel patterns), brand growth strategies and the investment strategies of our clients domestic and abroad.Ê In other words, we see the winds of change long before they impact the industry.Ê And we are excited for what is to come in 2018!

Prior to embarking upon a second career in commercial real estate, Trica Jean-Baptiste was president and founder of Trica Jean-Baptiste Communications, LLC; an award-winning boutique Travel Hospitality PR based in NYC for 15 years.Ê While heading up Trica Jean-Baptiste Communications, LLC. she represented some of travel’s leading hotels, resorts and tourism units:Ê Rocco Forte Hotels, Star Hotel’s the Michelangelo Hotel, St. Giles Hotels New York, Hotel St-Barth Isle de France, Rosewood Hotels’ Caneel Bay and Little Dix Bay, Hotel Esprit St-German (Paris, France); Dubai Tourism, Scotland Business Tourism Unit, Brussels to name a few. Trica is a licensed real estate sales associate in (New York State).

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