Hotel Investors Focus on Value Enhancement Amid Challenges

According to CBRE, the hotel sector is expected to see modest growth through the end of the year, prompting investors to focus on cost control and value maximization after acquisitions, as reported on Globest.

Maximizing Value

Overall, U.S. investors hold a generally positive outlook on the hospitality sector, with half planning to increase their hotel investments, despite challenges securing and servicing debt.

To maximize value and secure better rates, investors can employ several strategies:

• Integrating Property Improvement Plans (PIP) with Property Condition Assessments (PCA) to align necessary repairs with remodeling requirements, optimizing expenses
• Reducing insurance costs and providing accurate property data, including COPE data (construction, occupancy, protection, exposure)
• Conducting Resilience Assessments can also potentially lower insurance premiums.

Improving Sustainability

Boosting efficiencies and reducing utility costs are also vital for enhancing value:

• Energy and water audits can identify excessive consumption and suggest reduction measures, providing installation cost estimates and potential funding options.
• Adding solar arrays can offset electricity costs and appeal to environmentally conscious guests.

Identifying Opportunities

Identifying additional revenue streams during due diligence can also enhance property value:

• Installing EV charging stations can attract guests with EVs and meet PIP requirements, providing a competitive edge.

Zooming Out

According to McKenna Luke, Managing Director at Partner Valuation Advisors, “Revenues have been strong over the last two years, and RevPAR in many markets has reached or exceeded pre-pandemic levels. There are headwinds, including cost of capital, wage pressures, and insurance. One key to maintaining value is being a smart operator and finding opportunities to boost revenue and to control costs.”