LOS ANGELES — Some of the
biggest names in hotel development kicked off the ALIS conference by discussing
why conversions are here to stay for big brands, why bifurcation of sponsors
matters, and why this was the perfect time for one of the hotel industry’s top
private investors to lean into its biggest transaction year ever.
Anthony Capuano, president and CEO of Marriott International; Elie Maalouf, CEO of IHG Hotels & Resorts; and Mit Shah, CEO of Atlanta-based Noble Investment Group, served on the
Boardroom XXV: Confronting Change panel on the first day of the ALIS (Americas
Lodging Investment Summit) by Northstar conference at the JW
Marriott/Ritz-Carlton Los Angeles L.A. Live in California. Hotel Investment
Today Editor-in-Chief Jeff Weinstein and AHLA President and CEO Rosanna
Maietta served as co-moderators.
When asked what is working for
his company development-wise right now, Capuano said a lot of that depends on
geography.
“In many parts of the world
where we are growing, you have some version of this K-shaped economy,” he said,
noting the strength of luxury (and branded residential), midscale (where
Marriott has become “fairly aggressive” of late) and upper upscale in Asia.
Conversions can drive 30-40% of signings and openings. Recognizing this, we’ve built an infrastructure and a philosophical approach so that, even in a booming economy, we don’t expect the usual reduction in conversions.
Anthony Capuano
But Capuano pointed to another
interesting trend that has changed recently as well.
“The other interesting dynamic
for those of us that have been doing this for a long time is we generally used
to see a phenomenon where, in a strong economic environment, you saw a big
uptick in new construction activity and conversions would start to recede into
the background… When you started to see weakness in the economy, you
would see a marked slowdown in new builds.”
But conversions, Capuano said,
aren’t going anywhere now, regardless of how the economy is doing.
“Conversions can drive 30% to 40% of
signings and openings. Recognizing this, we’ve built an infrastructure and a
philosophical approach so that, even in a booming economy, we don’t expect the
usual reduction in conversions. Instead, conversions will remain a fundamental
part of big brands’ growth stories going forward,” he said.
Bifurcation of
sponsor
Maalouf said he agreed with
Capuano, suggesting conversions are here to
stay.
“We all have more conversion products, more conversion
capabilities. Lenders are more friendly to it, and in many cases, you’re adding
a newer product,” he said.
Another key trend Maalouf
mentioned was bifurcation, but not in the way it’s commonly used to describe
hotel development and performance.
“One key trend that we’ve seen
post-pandemic… and this is actually global, from China to Asia to Europe and
certainly the U.S., we’ve seen a bifurcation, not just by segment, but also by
sponsor,” he said.
We’ve reoriented a lot of our efforts around the sponsor being really successful.
Elie Maalouf
Maalouf said that pre-COVID,
many investors could raise capital to build and finance a hotel, but that’s no
longer the case. He mentioned that through its first three quarters of 2025,
IHG is having one of its best years for hotel signings and openings. Why?
“Because we’ve reoriented a lot
of our efforts around the sponsor being really successful,” he said.
Maalouf said earlier in the day
he was talking to an owner who will be developing a project for one of IHG’s
ultra-luxury brands with branded residential. He added that the owner has the
capability to finance it without any institutional capital and could instead
use high-net-worth individuals, family sponsors, and other funds.
“There are so many other sources
of capital, and the agile, capable players are able to tap into those. I think
this is going to persist,” he said. “Not everybody’s going to be able to
finance hotels, but we’re all going to be able to succeed in cities with the
best sponsors, the best brands and the best operators. Just not everybody.”
Zagging into record
transactions
Shah said the recent dynamics of
the marketplace have left sellers conflicted about which market they are
selling into, and it has been hard to determine “what the level was.” He said
Noble used that dislocation to have its biggest transaction year ever.
“We’ve always thought about
investing as not spot trades, but what is our view over the next three to five
years,” he said. “Last year, as we’re looking at all that consternation, we
really leaned in from an investment standpoint and had our biggest transaction
year in our 32-year history.”
We saw this period where there was very little transaction activity and a need for capex spending and existing cash flow that wasn’t necessarily as stable as one would like. We thought that was really an opportunity for us to lean in.
Mit Shah
Part of that happened, Shah
said, because of the types of properties Noble focuses on, predominantly
upscale select-service and upscale extended-stay.
“We saw that as the market was
evolving, and our major competition, which has generally been the large capital
allocators, the global PE firms, were focused mostly on things that they could
distinguish from a reliability standpoint. For a lot of the larger firms,
hotels, obviously, by nature of the business, have been less reliable.”
So, Noble used the fact that many
competitors leaned into other commercial real estate assets, such as data
centers, rather than hotels, to secure more transactions.
“We saw this period where there
was very little transaction activity and a need for capex spending and existing
cash flow that wasn’t necessarily as stable as one would like,” he said. “We
thought that was really an opportunity for us to lean in. So, we had a pretty
significant capital investment.”
Fuzzy slippers and
travel hacks
At the end of the
discussion during a week when the weather and travel challenges was a hot topic of conversation in the ALIS hallways, the panelists were asked to shared their favorite travel hacks and accessories. Their answers were both thoughtful and funny.
Shah got a good chuckle from the audience when he said he
was at the stage of his life “where I travel with the slippers I wear at home.”
The furry ones, to be exact (on the inside, not the outside). They’re very,
very comfortable.”
Maalouf admitted he has
rediscovered the joy and pleasure of reading a book, even if it’s just for five
to 10 minutes at the end of a travel day before sleep. “It’s a great joy.”
When Capuano suggested he liked
the physical feel of newspapers, he was gently scolded for that not being a
travel hack.
His response? “Never check a bag.”
When Shah pushed back on that
assertion, Capuano got an even bigger laugh from the audience and Shah when he simply said, “They’re not fuzzy slippers!”