With rising interest rates, inflation and a slowdown in hotel transactions, there have been a lot of questions around hotel development and ownership. To gauge their opinions on how things are going, Hotel Business asked these questions—and others—to Bob Habeeb, CEO, Maverick Hotels & Restaurants; Mitch Patel, president/CEO, Vision Hospitality Group; Kerry Ranson, president, operations/partner, Raines; and Rick Takach, chairman/CEO, Vesta Hospitality.
—Gregg Wallis
We headed into the year with a lot of questions on how travel would fare throughout the year. How have your properties performed so far?
Habeeb: Globally, we are ahead of our expectations for the year. Growth in consumer travel has been encouraging and has assuaged several of our greatest concerns. However, many of the same stressors that were impacting hospitality before the pandemic remain as potential spoilers for future success. In fact, they are impossible to ignore today. Labor challenges, reliance on technology and increasing guest expectations are still chief concerns the industry must address. However, at this juncture, there is no reason to believe they will have an outsize impact on our operations.
Bob Habeeb Maverick Hotels & Restaurants
Patel: Overall, we have been happy with our portfolio’s topline performance this year. Our portfolio RevPAR exceeded our 2019 peak performance by 8% in 2022; through June 2023, we are up another 15%. Obviously, year-over-year growth is starting to decline as we are getting more difficult comps from last year. More generally, we have noticed a slight decline in leisure travel as we have reached the traditional summer months. However, we are encouraged to see continued growth in both business and group travel.
Ranson: The first quarter performed at and above expectations in most of our markets, and our rate gain assisted in reducing the inflation challenges we faced operating our hotels. The second quarter started strong, but that momentum curtailed somewhat. We still outperformed our previous year’s performance but were a few points behind for the quarter compared to our budget.
From a demand perspective, “revenge travel” subsided, but that also had to do with many American travelers going abroad this summer versus keeping their spending and vacations nationally. Our third quarter is softening, but we are bullish as we look at our pacing for a very promising fourth quarter to assist in finishing the year strong. We do see some potential headwinds as we approach the election.
Takach: We went into the year with some pretty aggressive expectations, and we are pleased to report that we are seeing very positive year-over-year results with some of our hotels far exceeding last year’s performance.
However, we do want to temper expectations as we budget for any new year. Our overall goal is to give each hotel and its managers goals that are aggressive but achievable, as property-level bonuses are pegged to achieving certain benchmarks. We want to give our people the tools they need to excel, and one of those tools is reasonable expectations.
Transactions are down for the year, especially with higher interest rates, inflation and other financial uncertainty. Are you still looking to purchase properties or have you decided to focus instead on the properties you have?
Habeeb: We are still looking for opportunities as they become available, as the transaction market remains challenging. One thing we are doing today is picking our shots and approaching opportunities differently. Acquisitions have become a big piece of our growth plan, as well. We are looking for attractive deals daily, but getting any deals done today is easier said than done due to the high cost of debt.
Patel: Every company creates value differently, and historically, we have created value through development. We look at acquisitions through our developer lens, so if we see an acquisition opportunity that is below our cost to develop, we are interested, especially if we can add value through operations.
Ranson: Our properties are front and center as we look to finish the year strong from a performance perspective, but we also have several assets amid renovations and a few new-builds underway. We are absolutely seeking purchase opportunities and hope to see more compelling transactions that fit our models, but we are bullish on activity through new acquisitions. With our platform, we are willing to be creative to get opportunities across the finish line.
Kerry Ranson Raines
Takach: First, we always focus on the properties we have. Whatever we have purchased will get our close attention.
Regardless, meaningful growth is important to any company. We continue to look seriously at properties that come on the market and conduct our due diligence and underwriting proformas when these properties fit our operating model and present value-add opportunities.
Many of the properties we see being offered in this era of more costly financing are performing reasonably well, so seller expectations remain high. Realistically, it is difficult to do transactions in any market environment, but deals are always available if you keep looking and stay disciplined in your approach.
How do you expect the rest of the year to go for your properties?
Habeeb: Our midterm booking pace looks favorable, though we anticipate some bumps in the fall when consumer travel retracts slightly. This is felt even more significantly following the first of the year, when the leisure travel that supports much of our industry’s growth subsides. We are anticipating gradual adjustments, not seismic shifts, but those can be easy to miss and may be cause for concern.
Patel: We are fortunate we have great hotels affiliated with high-quality brands in great markets with, most importantly, great people. There is no question that there are challenges out there. However, our booking pace trends and expectations for the second half of the year are ahead of 2022, so we are hopeful 2023 will finish on a high note with our best year in the history of our company. With where we just came from in 2020, I will take that any day.
Ranson: We feel bullish that the year will end strong. The third quarter does show some slowing and holes, but the pacing for the fourth quarter is stronger than pre-pandemic and will make up for any shortfalls that may occur in the third quarter.
Takach: We have enough advance bookings that give us confidence that we will do well for the rest of the year. We expect to continue to exceed expectations, especially where properties have performed well in the first half of the year. Moreover, group business continues to come back nicely and, overall, we are experiencing nearly a full return of corporate business at our properties.
