The New Players – Private, Independent Owners

Posted January 21, 2021

A number of first-time entrants have gotten into the race to acquire full-service hotels and resorts. Private and individual investors have been quickly moving into the lodging space in greater numbers over the past few years. In reviewing data from Real Capital Analytics for 193 full-service transactions in 2019 and 2020 valued at $20 million and higher, with 100 rooms or more, we uncovered some very interesting trends. Nearly one-third of those hotels were acquired by private high-net-worth or family office investors. That number is meaningfully higher than in the previous year. In 2018, fewer than 25% of the 156 comparably sized transactions were acquired by private individuals or family offices.

These astute investors:

• Lean towards larger, attractive full service hotels and resorts that provide enhanced asset appreciation.
• Look for assets that do not need a deep turnaround and can provide an immediate return.
• Focus on cash-on-cash returns rather than internal rates of return.
• Are more passive than active in their investment strategy.
• Are less apt to have investment partners.
• Are sophisticated and typically have experience with other real estate asset classes.
• Seek higher risk-adjusted yields than what they find in apartments, medical office buildings or the stock market.
• Prefer to engage third-party operators rather than brands to manage their properties.
• Tend to have a longer-term investment horizon.

The Plasencia Group made the conscious decision several years ago to expand our relationships with the independent and private investor community, many of whom were just getting into in the lodging sector for the first time. The results of those outreach efforts have resulted in numerous transactions and some wonderful relationships. If you’re an investor wading into lodging waters, we would be honored to advise you as you pursue stable well-founded hotel and resort investments. If you’re an owner seeking to exit an asset or portfolio, let us know if we can introduce you to some of our new friends.