While this past year has been wrought with plenty of challenges for hotel companies, there is still ample opportunity for growth for those owner/operators which have been able to narrow their operational focus and create compelling deals.
Hospitality Ventures Management Group (HVMG) represents one such company, according to Mary Beth Cutshall, EVP & chief development officer, who detailed the company’s overall outlook during the recent “ALIS 6×8: Recovery Top Of Mind” session.
Cutshall explained that the Atlanta-based private hotel investment, ownership and management company—which has a portfolio of nearly 50 hotels and convention centers—is currently focused on “originating great deals, growing its third-party management business and anticipating a recovery.”
She also touted the company’s operating strategies and performance during the past several months as key points of differentiation.
“HVMG was very successful in COVID-19 operational leadership efforts and the lessons that we learned from that. Our team was really careful to balance expense reduction strategies and ensure the guest experience remained intact. So we’ve been very focused on that and had exceptional results,” she said.
Those results include reducing total operating expenses by more than $15 per available room throughout the portfolio. In addition, HVMG’s gross operating profit margin for the five-month period ending October was 27 percent, which was 18 percent higher than the industry average of 19.2 percent, according to Cutshall.
She added that the company’s upper-upscale portfolio results were “even more impressive” producing 23 percent more top-line revenue than the industry average for the segment.
Cutshall—who emphasized the company is focused on “getting the word out” on the aforementioned results—also pointed out that management company consolidation within the industry could result in additional opportunity.
“I think there are owners that have done both management and ownership and they have decided going forward they want to focus on acquiring and owning only and hiring third-party companies like HVMG to manage their properties,” she said.
Meanwhile, Cutshall offered some insight on the company’s investment strategy.
“We’re looking at both off-market and on-market opportunities and there are definitely deals out there. We have been anticipating and waiting for there to be more deals; but we are seeing both full-service and select-service,” she said, adding that “some of them are distressed assets.”
Cutshall further elaborated on why the deal flow hasn’t been more robust and why assets are not being sold for 50 cents on the dollar as many in the industry had expected.
“Not surprisingly there’s an abundance of capital chasing deals and there’s not the supply to match the demand. It’s really driven the number of bidders [up]; sellers are receiving more offers and much stronger offers than they had anticipated. This has exceeded my initial expectations from months ago. I really thought that there would be more distressed assets with more discounts. We’re not seeing the volume that we had anticipated, but we still think it’s coming,” he said.
In discussing the future of the lodging industry, Cutshall noted she was “optimistic in general” and pointed to a couple of positive trends that have emerged as a result of the pandemic.
“I think there will be good things that will come out of this. One of those things is that there are some properties being repurposed. Whether that’s senior leaving or affordable housing, I do think the industry has been under-demolished. There’s a lot of outdated hospitality supply that needed to go away and some of that will and that will be better for the remaining supply in the industry,” she observed.
Cutshall went on to add. “I really do think there’s going to be innovation and a strategic focus that’s going to come out of this. I think people will look upon technology, not only implementing new technology but user acceptance and embracement of that technology. I like to think that will translate to better expense margins and efficiencies,” she concluded.