TLC notebook, Part 1: DEI, third-party buyers’ remorse, net buyers

PHOENIX – At the Lodging Conference 2024 in Phoenix last week, interest in making deals was high, but good inventory remained low, and the prevailing wisdom was the bid-ask spread was still stifling activity. But generally speak, broader optimism was driven by a presumed better interest rate environment ahead, not withstanding the uncertain outcome of the coming presidential election.

Throughout the conference, Hotel Investment Today held private meetings to discuss the industry’s state of affairs and where operators and owners updated us on their news. Here’s a roundup of those meetings:

Women in Hospitality Leadership Alliance (WHLA) and DEI Advisors. Perhaps the most inspiring meeting of the conference, these two organizations are advancing the cause for more inclusion and diversity in hospitality thought leadership as they continue to have an impact across the hotel industry.

WHLA Founder Rachel Humphrey said the group’s new Speaker Directory showcasing exceptional female hospitality industry leaders available to participate in industry events has reached 1,100 (200-plus in hotel real estate) and that representation of women and diverse men at the top four hotel investment conferences jumped to 46% today from 39% in 2023. WHLA wants to reach 50% representation on every industry stage and is now setting its sights on other conferences to continue its momentum.

Humphrey said remaining challenges include getting more women to say "yes" to speaker invitations and having more confidence once they do accept. WHLA is working on training solutions and resources to help get more confident women on stage.

DEI Advisors is launching a new website, itspersonalstories.com, a hospitality podcast. It tells the behind-the-scenes, personal stories about hospitality leaders, the challenges they have addressed and opportunities they have earned.

Between former BWH Hotels leaders David Kong and Dorothy Dowling, as well as Lan Elliott from Acacia Hospitality and Humphrey, some 220 podcasts have been completed and a channel for the newly named podcast can be found on YouTube, Apple Podcasts, Spotify, LinkedIn, Facebook and through the new website.

It’s hard to scale when you grow too fast.

Sloan Dean

Kong said he wants to package the podcasts for greater distribution and even author a book based on all the takeaways from the interviews. Kong added that he is starting to write a blog based on themes from the podcasts.

Remington Hospitality. Outspoken CEO Sloan Dean said 90% of third-party management acquirers are having buyers’ remorse. “It’s a broken machine with only 10% are hitting proformas. I call it buyer’s folly,” he said.

Dean said third-party operators need more programmatic equity partnerships, adding that 10% to 15% growth is good, with 20% getting hard to manage. “It’s hard to scale when you grow too fast,” he said.

He also predicted less M&A at the top of the third-party management chain unless new private equity enters the space.

Dallas-based Remington continues to expand its CALA business with five hotels operating and 12 development deals signed in the region inside 24 months. Watch out, though, Dean said, as he expects “the copycats coming to CALA.”

First Hospitality. President and CEO David Duncan said for the first time in 18 months his team is open-minded once again about deploying capital. He said pricing and the cost of debt for assets is getting better, especially for deals under $40 million.

Duncan likes the soft-landing look of the economy, believes GDP is solid, and he also likes the current supply-demand ratio.

In 60 days, First Hospitality, with some 70 managed hotels today (20-plus owned) will sell multiple assets and buy one in the upper upscale segment, according to Duncan. In 2025, he expects to be a net buyer by “a fair amount,” working with investment partners.

It’s an arms race of specialization and talent. You need growth to afford it.

Justin Jabara

Duncan and First like soft brands and unlike most today are still driving ADR to realize RevPAR gains.

Chicago-based First is focused on better labor management practices, department savings and is driving rooms margins through technology.

Meyer Jabara Hotels. While this Danbury, Connecticut-based owner and operator recently sold five hotels, cutting its portfolio to 30, President Justin Jabara said a deal was imminent to add 12 to 15 hotels in new markets such as Arizona, Texas and Illinois with a new partner he expects to grow with further.

MJH is under contract to buy one hotel and has three additional LOIs.

“It’s an arms race of specialization and talent,” Jabara said. “You need growth to afford it.”

The group has a nice flow of third-party deals and Jabara expects the portfolio to reach 50 by 1Q25.

Jabara also bemoaned how costs are hurting GOP, especially without the rate growth to help beat it.

He said NOI and GOP are suffering, and his teams are in the trenches trying to defeat cost creep, leveraging technology to decrease charge backs and increase upselling. They are also negotiating with vendors and brought all IT in-house.

Record-low turnover at 24%, their best associate satisfaction scores and a Michelin key on Long Island have also provided some relief.

CHMWarnick. CEO for 2.5 years Chad Sorensen said the asset management company still sees investors better trying to understand individual market conditions and, more importantly, the submarkets for acquisition.

He said another challenge is finding the right management company in a post-COVID environment, especially considering all the changes and growth among the third-party operators.

Lastly, he said disruption in the renovation and development cycles are still prevalent and continue to require even more upfront due diligence.

Note: Tomorrow, interviews with BWH Hotels, Hyatt Hotels Corp., Stonebridge Companies, Brittain Resorts & Hotels and Resolute Road Hospitality.