Q&A from the Webinar:
Q: What are you going to do if there is another lockdown?
A: Focus on driving topline revenue by offering marketing programs to corporate customers that need to get out of the house for a “home away from home” office. Also, control expenses to try and achieve bottom line goals.
Q: What is your strategy when selecting hotels to purchase (location, luxury vs. budget, etc.)?
A: We focus on branded hotels—Marriotts, Hiltons, and Hyatts. We also look specifically at limited service or Focus Service hotels where we can increase value. These hotels operate on a leaner model than full service hotels and can offer customers the amenities needed during their stay, which adds value for the consumer. Some value-add opportunities for the investment would include lowering the amount of occupied rooms and increasing Average Daily Rate (ADR), which would increase Revenue per Available Room (RevPAR). While lowering our occupied rooms, we have the ability to control expenses, thus lowering the cost margin of the hotels. This increases profitability!
Q: Does control in running the hotels influence the sale prices in a couple of years? Why?
A: Yes, it does! For example, if you have a $1 million asset that is at an 8$ cap rate, that same hotel operating at $2 million can be at a 16% cap rate. We focus on increasing our asset value by increasing topline performance and controlling the cost margins to increase assets position.
Q: What is the main reason hotels are up for sale? Especially if they are making money and are topline hotels?
A: The main reason they sell is because they are not making money. But to answer your question, it is because the relationship has ended with the investment. Some hotel investors have a time limit on how long they would like to remain in the deal.