Long-awaited benchmark interest rate cuts, tighter bid-ask gaps and new deal filters are driving sector-spanning development, acquisition opportunities to fast track expansion.
RALEIGH, North Carolina ‒ Concord Hospitality was well on its way to a third consecutive year of record or near-record growth even before the Federal Reserve’s Sept. 18, 2024 announcement of the first benchmark interest rate cuts since 2020.
Leadership paved the way for continued expansion with an early post-Covid move to broaden its funding network beyond the expected options of local and large regional banks to include family office-backed debt funds which partner with the private wealth side of banks.
“As traditional lending avenues became more constrained, we adapted to navigating alternative financing solutions that aligned with the evolving market conditions,” said Concord Chief Financial Officer Julie Richter in this exclusive interview.
She added, “Our owner/operator/developer business model was a big selling point. Lenders today, especially given the current landscape of commercial real estate, are increasingly selective in choosing partners with proven expertise. They seek developers and hoteliers who not only have a strong track record but also understand the critical cycle of feedback that operators rely on to enhance efficiency. Our deep experience with hotels and F&B concepts positions us uniquely in this regard.”
Different strengths, different strategies for hot-sector targets
That foundational work positions Concord to take full advantage of a friendlier lending environment for projects in its wheelhouse: newbuild upmarket and extended stay hotels.
“Last year, we put eight projects into the ground ranging from $15 million to $90 million,” said Richter. The Fed’s 50-basis-point interest rate cut should accelerate that. “Credit markets were loosening up even before the interest rate cuts. We recently secured funding for five new development projects that were not possible a month ago.”
Watch for continued growth in developments featuring debut brands that support Concord President and CEO Mark Laport’s “new wins in America” strategy.
“Overall, the company is ramping up investment in a number of categories. For the upscale segment that centers on expanding the Opus Collection, which was custom-built by Concord to operate and develop upper-upscale hotels, restaurants and bars within the company’s portfolio,” Richter said. “Concord is focusing on building its lifestyle portfolio as many of its hotel brand partners, such as Hilton, Hyatt and Choice Hotels, push to invest in and debut lifestyle brands.
Julie Richter, Concord Hospitality
Launched in 2019, Opus Collection by Concord has given the company a differentiated competitive edge to compete in the crowded upmarket, lifestyle sector. This platform’s track record for award-winning performance across hotel operations and F&B creates more levers to pull to maximize returns for its clients and more reasons for lenders to say “yes.”
Equally important for portfolio growth and performance, Opus Collection’s demonstrated ability to identify and capture incremental revenue opportunities in upmarket lifestyle hotels allows Concord’s development team to apply a wider menu of filters to its due diligence. That helps this holistic company sharpen its pencil to make the numbers work for high-potential assets that could get a pass from competitors with a narrowly focused lens.
Why Concord “loves” extended stay ‒ and what it’s doing about it
According to Richter, Concord’s look-and-look-again read on assets and markets has often proved to be a powerful catalyst for portfolio and financial growth. The latest case in point is investment in the extended stay sector.
Some recent data show a RevPAR decline in midscale and economy extended stay. But those metrics require perspective, according to Richter.
“We love the economy and mid-scale extended stay segment. It historically has been underserved with
new development. Think about all of the old economy extended stay assets you see along the
highway. With fresh product, we think, and the brands agree, that there is plenty of white space in this segment,” Richter said.
We believe that the gap between what we would pay and what sellers are looking for is narrowing and expect to acquire several assets over the next six to nine months either as individual deals or in portfolios.
Julie Richter
The fact that its partner, Whitman Peterson, shares that optimistic outlook for extended stay is creating a major build-out for Concord’s portfolio. In keeping with its proven ability to monetize new concepts, Concord Hospitality broke ground on the first-ever StudioRes by Marriott at the beginning of 2024, six months after the brand was announced.
Projected to open in spring 2025, the property is a continuation of Concord Hospitality’s venture with Whitman Peterson in the economy extended stay space that will see the two partners develop more than 40 economy extended stay properties spanning more than 30 North American markets in the next several years.
Extended options for needle-moving growth
To date, Concord’s leadership has prioritized organic growth, with a decided preference for new product. That may be changing as the business model that houses the nation’s sixth-largest third-party management company continues to scale up. It’s about “value add,” not growth for growth’s sake, said Richter.
Here are the ground rules.
“We are actively pursuing acquisition opportunities both for investment and for deals that may be of interest to our clients,” she told Hotel Investment Today by Northstar. “We like to find opportunities where we can add value with our development, renovation and branding expertise, and are largely agnostic as to segment.”
She noted, “There is still a bit of a bid/ask spread in the marketplace so we are seeing deals that either don’t trade or are circling back at prices which are fairly deeply discounted to original guidance on the assets. We believe that the gap between what we would pay and what sellers are looking for is narrowing and expect to acquire several assets over the next six to nine months either as individual deals or in portfolios.”
That would speed Concord toward its goal of 190 assets operating or in the ground before the end of Q2,2025.
“Concord has built a comprehensive skill set to support its strategy. That combination has, and will continue, to enable us to grow quickly without sacrificing the customized discipline that has tailor-made our business model to our goals and those of our investors and clients,” Richter said.
Mary Scoviak is custom and design content director for Hotel Investment Today by Northstar.
The views and opinions expressed in this content do not necessarily reflect the opinions of Hotel Investment Today by Northstar or Northstar Travel Group and its affiliated companies.