How are investors viewing hotels at the moment?
- Acquisitions are mainly on hold, except for several transactions well underway at the onset of the pandemic.
- Private equity owners are focusing on defensive strategies for their own portfolios. They have significant dry powder and will deploy capital toward core and non-core opportunistic acquisitions once the virus is contained.
- Public REITs trading at large discounts to NAV are triaging portfolios as a way of identifying assets to dispose of to create liquidity.
- Generalist investors are relying heavily on asset management experts to craft the best plan to move forward.
- From a debt perspective, hotel owners are looking for loan modification opportunities.
- Governments across the world are proactively crafting stimulus packages that will provide some relief to the industry, whilst owners are also considering repurposing assets.
There is much talk of the crisis leading to opportunity. In what context do you envisage some of these opportunities emerging for investors?
- The balance may shift to more opportunistic investors, who will take advantage of distressed assets which we expect to pick up pace in the second half of 2020.
- Although transactions are likely to take longer, more robust due diligence measures will likely be adopted compared to pre-virus and we can expect to see shifts in pricing.
- A considerable amount of dry powder remains from 2019, however it will be more cautious at an investment committee level depending on the opportunity.
- We expect flight to quality real estate assets in core markets such as London, Paris, Berlin and Amsterdam as core markets will offer better security when exiting the crisis.
Will we see a wave of hotels emerging from the crisis having been re-purposed as alternative real estate asset classes?
- We may see even more generalist investors compared to specialist investors, as they look to diversify their portfolios across all asset types.
What is your hope for the hospitality industry in a post COVID-19 world?
- While the hospitality industry is no stranger to crises and continues to remain resilient in times of turmoil, no one could have predicted the sheer pace and speed at which COVID-19 has gripped the world.
- Hotel brands are likely to recover more quickly than non-branded assets, as hotel guests are more inclined to turn to trusted brands. Travel patterns will ultimately shift in the short term and a greater focus on hygiene and personal well-being may move demand towards tried and tested hotel brands away from less standardised lodgings like Airbnb.
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Philip Ward will be moderating the ‘Investors Panel: Resetting the Risk vs Opportunity Balance’ during In Sync.
In Sync is a virtual event from Questex Hospitality Group that commits to uniting senior leadership within the global hospitality sector. Taking place on the 18th and 19th May, the event will look at the global hospitality investment landscape and how to plan for its future. To register for this complimentary event, visit www.HospitalityInsights.com, click Attend an Event from the drop down menu and select In Sync.
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