Hotel Development - Anyone Involved in this business?

[Victoria Winters]

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?

[Chris Winterhalter]

@Victoria Winters 

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!