The past year has certainly been a wild ride for hotel owners and developers. It started with questions about how far the industry would travel on the road to recovery, but as the year progressed, hotels were reporting better-than-expected results. Heading into 2023, there are some headwinds that will need to be overcome. Hotel Business spoke to Neil Amin, CEO, Shamin Hotels; Evens Charles, founder/managing principal, Frontier Development & Hospitality Group LLC; Andy Chopra, managing partner/chief investment officer, Banyan Investment Group; and Akki Patel, CEO, LRE & Companies, to discuss the ups and downs of 2022 and forecast what lies ahead in 2023.
—Gregg Wallis
Did 2022 meet the expectations you had going into the year?
Amin: Yes, we witnessed surprisingly strong pricing power and growth in the leisure segment, which enabled us to exceed our expectations for the year.
Charles: Q1 2022 was soft due to Omicron and governmental restrictions, but the rest of the year seemed to have bounced back. Therefore, we fell shy of expectations in some assets, while others rebounded strong enough to still meet the year-end expectation.
Andy Chopra Banyan Investment Group
Chopra: For the most part, it did meet our expectations. We came close to meeting our goals on acquisitions and made a few strategic exits. We acquired nearly $100 million in properties and met our goals on dispositions. Proceeds from the sales allowed us drive investor returns and fund acquisitions. Overall, we pruned hotels that underperformed in order to meet our growth goals while adding fresh product for a net improvement to our property count as we move towards our goal of $1 billion assets under management.
Patel: 2022 was better than we expected due to the areas we operate in. Labor and interest rates were the most significant issues. Gratefully, we were able to close on deals, open properties and begin new construction—all within one year.
Are you looking to purchase new properties? Are you focusing more on buying existing properties or are you building new ones? Why?
Amin: We historically pursue a bi-furcated approach of opportunistically purchasing value-add assets while developing hotels with category-leading brands in resilient locations. Our development pipeline provides a continued strong base of assets that our foundation has been built upon, while our acquisitions enable us to penetrate locations that may otherwise be unavailable.
Charles: We just purchased the Chicago Marriott Suites last August with a value-add plan and are looking to purchase after the New Year.
Neil Amin Shamin Hotels
Cost of capital today and sellers’ expectations for pricing are not matching up; therefore, I believe the transactional market has slowed down as a result. Once we get some clarity on the state of the economy, we think there will be some buying opportunities in 2023, but they will not be a dime a dozen.
We are focused on development at the moment because we can go through entitlements and pre-development during the uncertainty of the market as we do not need to capitalize our deals at the moment. We are hopeful that our timing is on par with an upward trend.
Chopra: Yes, we continue to seek hotels affiliated with well-respected brands in markets with multiple demand generators that are better suited to withstand occasional market fluctuations. We believe the best course for us to concentrate on buying existing properties. We see upside in value-add hotels which provide for some immediate cash flow with opportunities for improvement cash flow after instituting operational efficiencies and/or completing CapEx.
Patel: We are always looking to grow strategically and assessing our options when it comes to development. At the moment, we are focused on building to maximize our investments and undertake a long-term business outlook for our assets. In building, we can also create better value for us and our investors by taking projects through the entitlement process, building and operating. We like doing all the groundwork.
Akki Patel LRE & Companies
With all of the uncertainty heading into ’23, how are you preparing for the year?
Amin: We continue to search for ways to utilize technology to improve our workflow and reduce the workload of our associates. We feel there are opportunities to onboard tools from emerging providers to change our processes, similar to how fintech is disrupting the financial services industry.
Charles: [We are] just continuing to work on our development projects, reaching out to our brokerage relationships to inform them of our buying strategy and, as just stated, hoping to go into an economic upward trend barring there is not another pandemic, geo-political or some other impact that affects the entire economy.”
Chopra: While the outlook remains murky, Banyan remains focused on our strategic goals and committed to our sense of discipline and our core values. Tactics can adjust based on market conditions; however, strategy should be consistent. We find ours to be simple but quite effective: Unlock value and drive cash flows, discipline as it relates to analysis and staying true to who we are.
Patel: We do our best to identify what we want the coming year(s) to look like for our company. We continue assessing costs, shopping vendors and negotiating. Retaining our core labor staff will help us overall. As a company, we ensure our processes are streamlined, leaving no training costs or guest service gaps.
