Increase deal flow should create new opportunities for
third-party managers with some looking to Europe where potential is ripening.
NATIONAL REPORT – Management development opportunities are
starting to pick up early in 2025 as investors slowly ramp up stalled projects.
“There have been a lot of projects announced that didn’t
come to fruition because of financing costs or other costs. Now that we’ve seen
some of those costs stabilize and financing costs moderate and maybe even
backup a bit, you’re going to see a little bit more development activity
coinciding with transaction activity,” said Brian Hughes, executive vice
president of Business Development at Twenty Four Seven Hotels, Irvine,
California.
There have been a lot of projects announced that didn’t come to fruition because of financing costs or other costs. Now that we’ve seen some of those costs stabilize and financing costs moderate and maybe even backup a bit, you’re going to see a little bit more development activity coinciding with transaction activity.
Brian Hughes
While development activity is still not broad based and still
varies from market to market, leaders agree that the economy and extended-stay
segment will likely deliver the most opportunities for ground-up projects.
The other piece of the management growth equation will come
from M&A and most experts say they are optimistic about new growth as they
expect a fairly aggressive year on the transaction front.
To be best prepared for all opportunities, Bryan Postema,
COO of Miami-based Driftwood Hospitality Management, said his organization has
restructured into separate full-service and focused-service branches to better position
itself to take advantage of coming management opportunities.
“It’s no secret, both in Hilton and Marriott seem to have
the largest pipelines in the lifestyle category. So, that’s one area we where
we’ve put a lot of our effort,” Postema said. “Secondly, we’re putting people
into extended-stay and focused-service positions as we’ve seen some good growth
in terms of contracts. Lastly, due to what’s happening in the lending
environment, we do think that special servicing is still an area where you are
going to see some hotels end up. We’re paying a lot of attention and talking to
a lot of the different special servicers… I wouldn’t say that it's
significantly more than what we’ve seen the last two years, but it’s an area
where we’re always ready.”
Generally, Postema said Driftwood expects to see net
management growth in 2025 with what he considers a good pipeline of deals at
hand. He said they netted about 15 hotels last year and, at the moment, are
looking at a similar situation this year.
International opportunities
Other U.S.-based operators like Miami-based Gencom see good
opportunities for management growth in European markets, which remain fractured
from a management perspective.
There is unlimited opportunity, but you have to have the right team that can sift through it because you could get caught down a rabbit hole very quickly, chasing deals where, at the end of the day, you don’t really have a seller or know the path to ownership.
Alessandro Colantonio
“There is unlimited opportunity, but you have to have the
right team that can sift through it because you could get caught down a rabbit
hole very quickly, chasing deals where, at the end of the day, you don’t really
have a seller or know the path to ownership,” said Gencom’s Chief Investment
Officer Alessandro Colantonio. “You have to have a set up overseas to really
attack these deals, and we have been able to do that with Hamilton Pyramid
Europe and are now expanding that with Axiom Hospitality.”
For North American-based operator to simply start looking
for deals in Europe without having a team and a home base there will be
challenging, according to Colantonio, who added that Gencom would like to grow
on the buy side in the U.K. and Europe but is more likely to add more on the
management side. “We may do some smaller co-investment through those deals, and
then continue to figure out how to build a stronger acquisition platform in the
U.K. and Europe.”
Looking further afield, Colantonio said Gencom looked at a couple
of opportunities in India last year, and it took a lot of resources. “For us to
go into those parts of the world, it would need to be scalable immediately. We’re
not going to do a one-off acquisition. So, it would need to be a portfolio or
an operating platform that comes with the senior leadership. But there is
absolutely opportunity – it’s just hard to dive right in without a plan and
without the resources behind it.”
At Highgate, a team in Portugal has managed some 20
properties, and they have two more in London.
“You really need to establish infrastructure there and have Europeans
heavily involved in the growth and execution of the business,” said Mark
Keiser, president of development for Highgate’s Viceroy Hotels & Resorts.
“There’s a big market for it when you’re able to figure out how to do it right…
I expect that Highgate will be an active operator in Portugal long after it
sells its interest in the ownership of that portfolio. We’d like to do the same
thing in the Middle East, Spain.”
More specifically for the Viceroy brand, Keiser said they
want to be in European capital markets, as well as establish resort
destinations as a third-party operator.