Skift Take
Financiers liked the toughness and consistent operation of extended-stay hotels throughout the worst of the pandemic. However a $1.5 billion play for a portfolio and not even the whole WoodSpring Suites brand name reveals where investors see travel demand concentrating during the recovery.
Cameron Sperance
When you hear the term “trophy possession” tossed around in many hotel property and investment circles, it generally creates pictures of something like the original Waldorf Astoria in Manhattan or the Raffles in Singapore.
However 2 of the biggest financier groups can’t turn away from the other end of the hotel spectrum– the very remote other end.
Investment firm giants Blackstone and Starwood Capital are once again signing up with forces to take control of a substantial variety of extended-stay hotels, budget-minded homes that interest a mix of roadway warrior travelers or people between long-term housing in need of a longer stay.
The two companies plan to buy 111 WoodSpring Suites properties from Brookfield Property Management for $1.5 billion, the Wall Street Journal first reported Friday. The offer comes less than a year after Blackstone and Starwood Capital collaborated to purchase the Extended Stay America chain and its approximately 650 hotels for $6 billion.
This most current deal would not be for the Choice Hotels-owned WoodSpring Suites brand name itself. It also isn’t for the brand name’s whole realty portfolio, a spokesperson on behalf of Option Hotels informed Skift.
But it does make the buyers a substantial proprietor for the business. There were almost 300 hotels under the entire WoodSpring Suites portfolio, according to Option’s latest annual report to the U.S. Securities and Exchange Commission.
Agents with Blackstone and Starwood decreased to comment.
Eyes on Extended-Stay Hotels: The restored focus on extended-stay hotels is part of a broader interest from hotel investors that swelled during the pandemic. None of Extended Stay America’s hotels shut their doors, even temporarily like so many other properties, during even the worst months of the pandemic.
But resilience extended beyond simply the one brand. Starwood Home Trust, the realty trust that Starwood Capital CEO Barry Sternlicht also manages, reported its InTown Suites extended-stay brand had an 80 percent typical tenancy rate throughout the very first months of the pandemic.
“Twenty percent of our hotel exposure remains in extended stay hotels, which have actually considerably exceeded other hotel segments and balanced over 80 percent occupancy throughout Covid,” Starwood Home Trust President Jeffrey DiModica stated on an investor hire August of 2020.
Sonesta International Hotels Corp., which turned into one of the largest U.S. hotel companies in 2015 following its RLH Corp. acquisition, had extended-stay brand name overlap with its ES Suites brand and RLH’s GuestHouse, Americas Finest Value Inn, and Knights Inn brand names. But company leaders plan to hold onto each of these brand names.
There is growing industry belief that extended-stay brands can appeal across a range of cost points and will continue to attract service tourists along with people preferring more of a short-term domestic use.
Companies like Hilton and Marriott recognize the trusted future of service travel has more to do with mom-and-pop business that require their employees on the roadway– global health crisis or not– and do not have the remote work high-end paid for employees of former income and occupancy chauffeurs like consulting and financial companies. Extended Stay America even released a higher-end brand name post-acquisition last summer in pursuit of more service tourists.
“The [WoodSpring Suites portfolio acquisition] plays precisely into this narrative of white collar employees working from house and not having to go on the road if they don’t want to,” Jan Freitag, national director of lodging insights at CoStar, stated. “But individuals work with their hands, installing things, constructing things– they are out there, and they’re typically frequenting these minimal service-type residential or commercial properties where they don’t need a great deal of meeting space.”
An Increasing Phoenix in the Downtrodden U.S. Hotel Advancement Pipeline
The advancement pipeline for U.S. hotels is down from its all-time high seen in May of 2020 and even from a year ago, according to LodgingEconometrics. The overall U.S. hotel building pipeline ended 2021 at nearly 582,000 rooms underway across 4,814 properties– an 8 percent decline from the total projects under construction at the end of 2020. It was a 10 percent drop from the previous year’s spaces count.
However there is some great news in the dim report.
The variety of projects in the early preparation phases of development was up 18% by projects and 11 percent by rooms from completion of 2020– a signal construction financing is going back to the U.S. hotel sphere.
Accor’s Bullish Year for North American Deals
Accor’s CEO and deputy CEO are quite frank when it comes to their presence in the U.S.: It could be a lot much better and bigger if it weren’t for the cutthroat competitors from brand names like Marriott and Hilton.
“The U.S. is overpopulated by competition, and this competition is, in reality, doing exceptionally well,” Jean-Jacques Morin, Accor’s deputy CEO, said in an interview with Skift last November.
This doesn’t imply Accor is disregarding North America, however.
In 2015 was a record-breaking year for the Paris-based hotel business in North and Central America. The brand-new offers include a mix of Accor brand names as well as for its lifestyle brand names that now exist under an Ennismore joint venture.
A few of the upcoming hotels in the area consist of a string of Fairmont hotels– including one in Orlando opening in 2025, two Novotel jobs in Mexico, additions to the MGallery Hotel Collection, and the ultra-luxury Sofitel Legend Casco Viejo in Panama as well as the Raffles Boston Back Bay Hotel & Residences, both of which are slated to open this year.
The business’s Ennismore spin-off, of which Accor owns two-thirds along with the namesake behind brands like The Hoxton, landed offers for numerous hotels going under the Morgans Original imprint, SLS brand name, and the 21c Museum Hotels flag.