Ground Up New Construction Hotel Project Analysis Help

[Parth Patel]

Hello All, 

I am working on a new construction hotel project in Smithfield, NC, and am seeking constructive feedback from professionals in the hospitality sector. Below are some key metrics and the proforma I have compiled from a feasibility study and an STR report. The site and TownPlace Suites by Marriott flag have already been secured. We have also partnered with a reliable general contractor who will be investing in the project and has extensive experience in mid-scale hotel construction. My partner and I have many years of experience owning and operating hotels in this market and are approved by Marriott to manage this project. Our backgrounds include owning and operating properties under Choice, Hilton, Sonesta, and Red Roof Inn brands.

This will be the second Marriott-branded hotel in Smithfield, with the other being an older Fairfield Inn. We anticipate that demand for mid-scale extended-stay rooms in this tertiary market of Raleigh will continue to rise over the next 5-10 years, as Johnston County is the fastest-growing county in North Carolina. Our current mid-scale property in Smithfield has seen an increasing number of guests staying between 7-29 days. Our closest competitor in Smithfield has achieved an ADR of $140 and RevPAR of $105 in 2022 and 2023, leading us to believe that a new mid-scale extended-stay property can achieve similar numbers.

We welcome any insights from those in the hospitality industry on any aspect of this project. We are quite advanced in the process but would appreciate feedback on the LTC targets for similar builds and whether any of our numbers might be overstated or overlooked.

Thank you! 

[Robert Ellis]

Quote from @Parth Patel:

Hello All, 

I am working on a new construction hotel project in Smithfield, NC, and am seeking constructive feedback from professionals in the hospitality sector. Below are some key metrics and the proforma I have compiled from a feasibility study and an STR report. The site and TownPlace Suites by Marriott flag have already been secured. We have also partnered with a reliable general contractor who will be investing in the project and has extensive experience in mid-scale hotel construction. My partner and I have many years of experience owning and operating hotels in this market and are approved by Marriott to manage this project. Our backgrounds include owning and operating properties under Choice, Hilton, Sonesta, and Red Roof Inn brands.

This will be the second Marriott-branded hotel in Smithfield, with the other being an older Fairfield Inn. We anticipate that demand for mid-scale extended-stay rooms in this tertiary market of Raleigh will continue to rise over the next 5-10 years, as Johnston County is the fastest-growing county in North Carolina. Our current mid-scale property in Smithfield has seen an increasing number of guests staying between 7-29 days. Our closest competitor in Smithfield has achieved an ADR of $140 and RevPAR of $105 in 2022 and 2023, leading us to believe that a new mid-scale extended-stay property can achieve similar numbers.

We welcome any insights from those in the hospitality industry on any aspect of this project. We are quite advanced in the process but would appreciate feedback on the LTC targets for similar builds and whether any of our numbers might be overstated or overlooked.

Thank you! 

 we are building a building just like this in Columbus Ohio except vertical. we added kitchens and all studios and common commercial and mixed it in. multifamily is much easier to finance. we got a similar valuation. we don't have to buy 1 million dollars worth of furniture either. apartment hotels are what some people call them but we are underwriting affordable housing. we copied the hotel development rezoning applications in our market but went for multifamily and I had it underwritten at 15 million and we just had the number one debt placement broker look at it and appraise it for 20 million because they added a tax abatement. hotel development works because of the nightly rate and higher occupancy and no kitchens in every unit. I don't think you can go wrong if you have the liquidity and the market is strong. don't forget that hotels are built in the middle of nowhere brand new and do fine. if you want me to look more closely at it send me a DM, this is ours right here that we proposed so you can see the style but it's 81 residential units, 45000 sq ft, 6000 sq ft of retail, no parking. 

on your assumptions, your occupancy rate looks high. pull some hospitality reports in the market and see what it is. your exit cap looks about right for what I've seen in hospitality. I talk to hotel owners in our market and from what they do it's a lot. I'd recommend mixing in more commercial to balance out multiple assets, buy a liquor license for a few hundred thousand, etc to make the deal work a little better. columbus hospitality isn't as strong unless you are in the urban core but even then I'd go for a lower risk asset class like multifamily and retail mixed use. hotel is very strong operator but management intensive. I don't think you can go wrong. 

https://columbusunderground.com/11-story-building-proposed-f...

[Parth Patel]

Thank you for reviewing our project! Your development looks fantastic, and I'm keen to learn more about mixed-use development. Unfortunately, Marriott generally restricts franchisees from incorporating other businesses into their interstate properties, although they do allow for more creative designs in urban markets.

According to the STR report I commissioned for the five closest competing properties, their occupancy rates were 73% in 2022 and 75% in 2023. Like your build, our project is situated on a smaller parcel of land compared to other Towneplace Suites I've examined. Our initial goal was to aim for 100+ keys to reduce the cost per key and better achieve our ADR and occupancy targets with aggressive marketing towards our mix of commercial and leisure stays.

I'll send you a direct message later today and would love to discuss this further at your convenience. I greatly appreciate your time and insights!

[Robert Ellis]

Quote from @Parth Patel:

Thank you for reviewing our project! Your development looks fantastic, and I'm keen to learn more about mixed-use development. Unfortunately, Marriott generally restricts franchisees from incorporating other businesses into their interstate properties, although they do allow for more creative designs in urban markets.

According to the STR report I commissioned for the five closest competing properties, their occupancy rates were 73% in 2022 and 75% in 2023. Like your build, our project is situated on a smaller parcel of land compared to other Towneplace Suites I've examined. Our initial goal was to aim for 100+ keys to reduce the cost per key and better achieve our ADR and occupancy targets with aggressive marketing towards our mix of commercial and leisure stays.

I'll send you a direct message later today and would love to discuss this further at your convenience. I greatly appreciate your time and insights!

 I think you've done your research and the project looks great. I talk to developers all over the us and most of what you have would pass my initial screening to move forward. then it would go to sponsor experience, liquidity, construction experience, site location and site reports, entitlements, construction partners, etc to clear all the conditions. make sure you have a plan to purchase all the fixtures we passed on that. not sure about hotel financing of beds, desks, etc 

[Pal Patel]

Nice deal! i think your margins might be overly optimistic. 40% flow through on a hotel is pretty high. I Understand its in the extended stay segment, but id be a little more conservative there. maybe 35%. Franchise fees look too low at like 6%? are you getting incentive from Mariott? otherwise id prob bump that up to 10%. Who are you using for you competitor?