I am interested in getting involved with larger projects, hotels in particular. I would like to know if there is anyone in the BP community is currently involved in rehab or development of smaller hotels. What advice would you offer a person entering into this area of real estate investment?
I have a colleague of mind who just started a renovation of a hotel in Carlsbad, New Mexico and I also work with a business partner whom structures deals. if you have any particular questions, I could inquire on your behave.
I'm heavily involved in hotels, currently on the construction front but have quite a bit exposure to the investment side. Actually one of our goals this year is to develop an extended stay or limited service hotel for our portfolio. We will see if I can pull it off!
It's a very exciting CRE property type however it's also very challenging. Most people don't just jump into hospitality. Most players in the industry have spent their entire careers dedicated to hotels/hospitality. I've been very careful to jump over the investment side even though I'm very comfortable with investment real estate. It's extremely operator driven & local demand generators can make or break the investment. Just like other CRE property types the hotel business is a small circle of individuals & companies.
With that being said I would think about your goals. If you really want to pursue hotels then I would lay out those goals, figure out why you want to transition/diversify into hotels, and then figure out what your role will be within your investments. From there you can figure out who to start networking with. Think about hotel professionals/owners etc in this breakdown:
Hotel REITS/PE Firms - Larger firms with good sized portfolios, generally just handle asset management but could have separate divisions depending on the company i.e. management etc.
Hotel Owners/Ownership Groups/Developers - Could be a single owner or a smaller firm that will generally own all of their portfolio or will be the sponsor on all deals and have significant equity. When an ownership groups grow they generally form a management group.
-Hotel Management/Development Companies (they may have an equity stake in their portfolio or they may only handle 3rd party management). It's very typical for a hotel management company to invest sliver equity into a hotel deal to get the management contract and to have some skin in the game (5-10%). They will make fees on management, consulting, development/sponsorship, etc.
-Hotel Brokers - Hotel brokers are generally not under the big name brokers, there are a handful of specialty brokerage firms that just handle hotels, motels, casinos. They will find you the deals & potentially help you secure debt financing.
-Hotel investment banking, debt/equity placement, commercial brokers - the debt lenders, some can help with equity placement but this is more difficult. They will generally specialize in hotels only or just a few other property types.
-Hotel Consultants (consulting & valuation) - they will handle feasibility studies, appraisals, & potentially some outside consulting.
-Hotel Design & Architecture Groups - handle design, architecture, PIP review, ADA compliance, potentially procurement.
-Hotel construction - Generally a speciality contractor understanding hotels, brands, PIP's, production work, fast paced schedules, etc. They will handle some or all of procurement depending on the company. Some might have architecture and/or design in house.
It's actually an excellent question, hotels are very interesting and I often wonder how I would have jumped into the industry without exposure through our construction company. It definitely takes dedication, especially now as the hotel market is heating up. Good luck!
@Victoria Winters I previously worked with a group that specialised in hotels at the higher end of the market where it is all about branding and bringing in the right clients. I know more about that end of the market than the lower end but if you are planning on holding the hotel its a business with vacancy rates that change daily not yearly. The success will depend more on business acumen and location.
If you are not running the hotel but buying and selling to hotel companies I would try and network with people involved in the industry. Most firms that do hotels have plans for where they want to buy based on a lot of research as well as a brand they uphold in terms of looks, feel, etc. if you know that you are way ahead of the game.
I am invested in one hotel property, and looking at another property that is looking for investor capital.
Management and relationships are key. Our manager is awesome! Developed relationships with local businesses and is greatly exceeding the projections he estimated.
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