Why Hotels?

Jab545's picture
Rank: Senior Baboon | 190

Hey everyone,

I have a meeting with an analyst working in the hotel group of a D/E placement firm, think HFF, CBRE, etc. I got set up with this person through networking and have not exactly had a ton of interest in hotels in the past, mostly because I didn't know anything about the asset class/the hospitality industry, although hotel deals definitely seem like they could be very interesting.

I'm currently looking for full-time roles and want to express interest in the hotel group, I wanted to see if anyone could tell me a little bit more about why hotels are an interesting asset class to work in so I could have some talking points for when I meet with the analyst. I did an office tour via a school club with a developer building a hotel last spring so I'm definitely going to mention how I found that interesting but I would love some other info if anyone has anything.

Thanks.

Comments (33)

Aug 12, 2019

When I was interviewing for an internship with a hotel/hospitality REIT, I mentioned that one of my main interests in hotels was the sheer variety of properties- difference brands/flags, style differences, levels of service, etc. Hotels are a very operations-intensive asset class and the cost of operations varies heavily between a basic hotel (Motel 6) and a full-service hotel (Omni, Embassy Suites, etc). Any other questions and I'll do my best to help.

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Aug 12, 2019

I'll definitely be sure to bring that up, if this goes anywhere I'll be sure to PM you

Aug 12, 2019

Because they're sexy. No other asset class (other than spec homes) can you fly in a piece of marble and a sculptor from Italy to hand chip the marble in the lobby for a completely custom look (true story btw).

"The three most harmful addictions are heroin, carbohydrates, and a monthly salary." - Nassim Taleb

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Aug 12, 2019

This is definitely a big reason why I'm interested in the group. The office I visited a few months back was constructing a very luxurious hotel in a major city, doesn't get much better than that

Aug 13, 2019
Malta Monkey:

Because they're sexy. No other asset class (other than spec homes) can you fly in a piece of marble and a sculptor from Italy to hand chip the marble in the lobby for a completely custom look (true story btw).

Point taken, but try working on a luxury apartment building in NYC. That shit happens more than you think

Aug 13, 2019

Ah, that's the shit I want to do. I built a nice lobby in my construction days, but the other team in my division was doing a banks HQ and they flew to Italy to hand-pick each marble slab and arrange it with a crane. Each piece was marked for a specific location so they basically configured the lobby floor in Italy and made sure it was perfect before shipping it all stateside.

Aug 13, 2019

Trophy office can get pretty sexy too. I've seen some ridiculous lobbies.

Oct 30, 2019

The luxry hotel business is so shitty this is literally 90% of the reason why people are in that business. Its sexy, exciting, you hobnob with wealthy people, your peers are "artsy" rather than stale and boring like other RE guys.

But at the end of the day you're basically running a restaurant people sleep at, your employees steal from you, they leave on a drop of a dime and the post capital returns are so much better elsewhere for less work.

We have luxury hotels in NYC that are making the same NOI as they were 15 years ago.

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Oct 30, 2019

Can you further explain

Aug 12, 2019

It's one of the easier asset classes to put yourself in the shoes of the end-user. You can do the same for multi-family obviously, but I find it easiest and most enjoyable with hotels.

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Aug 13, 2019

Hi @Jab545 ,
I appreciate your interest on working at hotel groups. They have got lot of excellent roles there. For instance, you can freelance hotels to reduce the commercial property tax by tying up with bigger concerns. A big start is waiting for you when you find the right job role.

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Aug 13, 2019

Wut?

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Aug 13, 2019

The hotel asset class holds one of the widest yield spectrums. Select-service hotels routinely trade at cap-rates in the low-teens while trophy assets with under-market rents can trade for sub-6% cap-rates. Hotels are also ubiquitous across all markets, primary, secondary, tertiary, etc... The small east Texas town of 15,000 people may have a Motel 6 just like downtown Austin has the W Hotel.

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Oct 30, 2019

Why wouldn't more people be buying select service if the return profile is much larger than a full service and better holds up in a downturn? What am I missing besides the security of the trophy asset? Are the cash flows at a full service that much less volatile? Why so? Seems the opposite.

Oct 30, 2019

Very few barriers to entry, threat of new competition always looms. Buildings are usually built like crap and sometimes not feasible to renovate because no room to make up costs in rent premiums.

Controversial
Aug 13, 2019

Edit: I guess people didn't like the response... No comments as to why though. [DELETED]

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Most Helpful
Aug 13, 2019

Some additional thoughts on hotels:

1) Hotel occupancy can be driven by factors much different than any other asset class. One example of this is (at least in major cities) is convention schedules. The cancelling of major conference or a center going offline for renovations (see the Moscone Center in SF as an example) Owners with heavy Bay Area exposure took short-term hits here due how much the convention schedule changed during this time.

2) It might seem contradictory at first, but high-end hotels/resorts tend to be more resilient during downturns than select or limited-service hotels. One reason for this is that the premium properties serve base that tends to be less affected by economic downturns than the lower-end hotels. So when the economy slows down, the Holiday Inn Express off of I-75 that services middle class families going to and from Florida can see a bigger hit to occupancy than a high-end resort hotel.

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Aug 13, 2019

Adding on to this, smart money can achieve tremendous returns with an asymmetric risk profile in the hotel space by investing in select-service hotels that draw from a recession resistant customer base - for example, a hotel that serves a large military base.

Oct 30, 2019

There has to be reasons as well to why select service also hold up better in a downturn also.

Nov 12, 2019

Its actually really sad, but select hotels (and especially extended-stay concepts or really anything with kitchen/kitchenette facilities) see great business during economic downturns because people end up living there. If you're short on money, it isn't exactly a pancake paradise, but it beats the shit out of sleeping in your car.

Oct 30, 2019

Are there any hotel groups in Dallas/Houston?

Oct 30, 2019

I've heard legacy HFF was top notch.

Oct 30, 2019

Yea I have too. I wonder how that's gonna work with JLL.

Oct 31, 2019

There are tons in Dallas.

Nov 12, 2019

Yea lately I've been looking them up. Should have a lot of opportunities after my MBA.

Oct 30, 2019

Why hotel? It's the most volatile of the real estate asset classes. And therefore presents unique challenges which necessities the need for savvy analysts.

Also...you might want to refer to it as hospitality or the accommodations industry instead of hotel. Others would be better suited to verify this aspect.

Consider being prepared to discuss your thoughts on the recent trend of duel-branded assets. It's just something to perhaps show you've done some background homework. You could find a way to introduce this trend/topic as one reason that you find the industry interesting.

Oct 30, 2019

What about Motels? In Ca they are basically housing now. Forget hospitality, even the state passed a bill allowing them to be transitional housing. Forget Hotels with recessionary tenancies...those Indian ran Motels are crushing it in terms of Cash on Cash.

Oct 30, 2019
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Nov 12, 2019