Yesterday, we kicked off Meet the Cash® 2019 – the Nationwide Lodge Finance & Funding Convention hosted by JMBM’s International Hospitality Group® – with the LIIC Prime Ten. Offered by my good friend, Mike Cahill, CEO and Founding father of HREC and certainly one of LIIC’s co-chairmen, the LIIC Prime Ten displays the views of the trade’s most energetic members within the hospitality market. — Jim
In regards to the LIIC Prime Ten
For the previous 15 years, the members of the lodge trade’s preeminent suppose tank, “LIIC – The Lodging Trade Funding Council,” are yearly surveyed to develop an inventory of the most important lodge funding alternatives and challenges for the approaching yr. This exhaustive survey leads to the LIIC Prime Ten, a extremely regarded profile of funding sentiment and attitudes for the lodging trade for the forthcoming 12 months. Altogether, the members of LIIC symbolize direct acquisition and disposition management of effectively over $60 billion of lodging actual property.
Members are presently extraordinarily energetic and have the heart beat of the market, with 64% of LIIC lodge traders having efficiently offered a lodge within the final 12 months and 50% bought a lodging asset. In defiance of any late cycle issues, 93% wish to purchase extra lodges over the subsequent 24 months.
The hospitality trade’s most influential traders, lenders, company actual property executives, REIT’s, public lodge corporations, brokers and important lodging fairness sources are represented on the Council. LIIC serves because the main trade suppose tank for the lodging actual property enterprise (www.liic.org).
2019 LIIC Prime Ten Survey Outcomes:
Lodge Actual Property – Largely Sunny Days Clouded by Labor Points: General, the 2019 LIIC Survey signifies principally sunny skies for the subsequent 12 months, with labor difficulties squeezing margins in a slower ADR development atmosphere. An awesome 90% imagine the restricted pool of labor has straight impacted property degree gross working revenue within the final 12 months. How can homeowners resolve the labor drawback? 67% advise investing extra in present staff, 46% recommend concentrating on younger highschool expertise and 41% imagine elevated use of immigrants will assist.
Lodge Property Values Nonetheless Growing: Over the subsequent 12 months, 40% anticipate that lodging actual property values will improve as much as 5%. 37% imagine values shall be flat compared to 2018. Much like final yr, Upscale (35%) and Higher Upscale (29%) are most well-liked targets for patrons at this time. 40% imagine lodge going-in capitalization charges will rise barely, with 37% believing charges shall be flat.
Prime Three Threats to Your Lodge Funding:
Low Unemployment (availability of labor): 67% of LIIC members imagine the shortage of appropriate staff is the primary menace to lodge funding. A rise from 49% in 2018 and 26% in 2017.
New Lodging Provide/Basic Oversupply: The previous high funding concern in 2018, new lodge provide, is now a detailed second (64%).
Federal and/or State Minimal Wage Hikes: On this low RevPAR development atmosphere, profitability margins are being squeezed shortly and with further minimal wage hikes on the horizon, LIIC members are apprehensive.
Lodge Transactions for Calendar 2019? In an abrupt turnaround from final yr, 43% imagine the entire greenback quantity of U.S. lodge transactions in calendar 2019 relative to year-end 2018 will improve, and 28% imagine quantity shall be flat. The overall variety of property forecasted to be offered by year-end 2019 is optimistic, 39% up, 36% flat and 25% down.
Lodge Debt: Buyers nonetheless like the present debt market, with 78% of householders planning to refinance within the subsequent 12 months. 58% imagine lodge acquisition lending circumstances shall be steady with present ranges over the subsequent 12 months. Apparently, 25% imagine the provision of debt will enhance, ceaselessly citing extra debt fund exercise.
Buyers Stay Contradictory on New Lodge Growth: Whereas 64% of lodge homeowners cringe in regards to the adverse influence new lodging provide is having on their lodge investments, 67% are pushing ahead and imagine it’s nonetheless an excellent time to construct, if selective about product and market. 82% of related LIIC members even have new lodges actively below improvement, with 85% believing Choose Service is the perfect product kind.
Lodge Patrons Annoyed? Amount: In a reversal from final yr, 36% of traders imagine that an “above common amount” of lodges can be found for buy, 39% at “common amount.”High quality: 66% imagine the general high quality (desirability to buy) of property available on the market is common. Within the subsequent 12 months, regional proprietor/operators and main personal fairness are anticipated to guide the lodge funding purchaser pool within the buy of Upscale Choose-Service lodges.
Scary Lodge Markets? LIIC members had been requested wherein three of the highest 25 markets they “wouldn’t think about shopping for a lodge.” This yr, LIIC members shuffled their playing cards, electing the identical 5 scariest markets whereas merely altering the order:
Norfolk/Virginia Seashore (33%; up from 4th final yr)
Nashville, TN (31%; down from 1st place final yr)
St. Louis, MO-IL (28%; down from 2nd place)
New York, NY (24%; up from fifth place)
Detroit, MI (21%; enhancing, down from third) Sleeper – the place to purchase? New Orleans! Just one vote towards, time to purchase in The Huge Straightforward.
Alternative Zone Funding? Trump’s actual property present, alternative zones, seems much less fascinating than anticipated, albeit nonetheless important. 36% of LIIC traders are planning to pay attention future lodging investments inside tax advantaged Alternative Zones.
What a few recession? “As soon as bitten, twice shy” lodge traders nonetheless see a nationwide recession in our close to future. 43% imagine it can happen in 2021, adopted by 25% in 2020. A courageous, Nostradamus-esque few (19%) don’t see a recession within the subsequent 4 years.
LIIC Bonus Questions:
Twitter? You will not attain high lodge traders on Twitter, 78% don’t use it in any respect.
Pay Faculty Athletes? 44% of LIIC imagine NCAA Division I faculty athletes ought to be moreover compensated with salaries or stipends. Capitalism guidelines!
No to check-out! Solely 11% of the nation’s high lodge homeowners go to the entrance desk to formally check-out after a keep. Labor financial savings!
Mike Cahill, LIIC co-chairman, produced this yr’s survey (www.mikecahill.com). Mr. Cahill is CEO and Founding father of HREC – Hospitality Actual Property Counselors, a number one worldwide lodge and on line casino brokerage and advisory agency (16 places of work nationwide) specializing in lodging property gross sales, debt financing, consulting and litigation assist (www.hrec.com). James Few and Morgan Wheeler, Associates in HREC’s Denver workplace, assisted all through the method.
ContactJim ButlerPhone: +1 310 201 3526Fax: 310.203.0567Ship E mail