Candlewood Suites Galveston in Galveston, Texas Listed for Sale

HVS Brokerage & Advisory, as the sole and exclusive advisory firm to Ownership, presents the opportunity to acquire the 83-key Candlewood Suites Galveston, a recently renovated, extended-stay hotel asset in Galveston, Texas. A new investor will have the opportunity to realize the significant upside of acquiring a recently renovated extended-stay hotel in a historically robust leisure market.

Strong Cash Flow, $770,000 NOI and 10.4% Cap Rate

• The 83-key count is considered an ideal size for an experienced owner/operator.

• Per the 2024 year-end financial statement, the hotel achieved a 58.4% gross house profit (GOP), leading to an impressive $770,000 (rounded) NOI flow-through, which underwrites to a 10.4% capitalization (cap) rate at the pricing guidance. 

• Based on HVS pro-forma projections, stabilized rooms revenue in 2026 (year two) is anticipated to exceed $2,100,000 ($70 RevPAR), with an NOI flow-through of $900,000 (rounded).

• From 2021 through 2023, the hotel’s GOP averaged 53.5%, supported by consistently low operating expenses.

Resilient Ramp-Up Period Post Renovation

• Ownership completed an extensive, property-wide renovation in 2022/23. Due to the comprehensive renovation, corporate accounts were displaced from 2000 through 2022.

• Based on the November 2024 STR report, YTD room-night demand for the submarket market and the hotel increased 6.1% and 12.8%, respectively.

• The hotel has experienced a strong rebound in rooms revenue, with YTD November 2024 revenue registering a 14.9% increase over the same period last year.

Highly Desirbale Extended-Stay Hotel Operation

• The Candlewood Suites brand has a strong reputation in the industry as one of the leading midscale extended-stay products; moreover, extended-stay hotels are highly desirable assets to own and have proven their resilience during downturns.

• The all-suite design promotes guest independence, which yields to lower housekeeping costs and potentially higher profits. The brand also promotes a low-cost operating model that allows a typical Candlewood Suites property to operate with twelve employees. This business model benefits an investor to operate an asset that yields high GOP margins and NOI flow-through.

Discount to Replacement Cost at $89,000 per Key

• This opportunity presents an investor with the ability to acquire the property at a price well below replacement cost, at $89,000 (rounded) per key.

• To construct a similar asset with comparable amenities, the estimated all-in investment would be a minimum of $130,000 per key. The higher costs are due to the scarcity of available land and limited franchise options in Galveston.

• Given the recent renovation, a minimal change-of-ownership property improvement plan (PIP) is expected.

Robust Drive-to Leisure Market of Galveston

• An investor will have an exceptional opportunity to purchase an asset strategically located near I-45 and within the “Texas Triangle” of Austin, Dallas/Fort Worth, Houston, and San Antonio.

• Approximately 21 million people reside within a four-hour drive of Galveston.

• There are numerous festivals, special events, sporting events, and gatherings held throughout the year in Galveston, with particularly strong demand generated during the spring and summer months.

• Tourism demand in Galveston has increased in recent years along with citywide efforts to improve local roads and infrastructure, expand the beaches, and improve the cruise-ship terminals.

• Per the 2023 Galveston Economic Impact of Tourism Study, completed by city officials last summer, tourist visitation reached a peak of 8.9 million visitors in 2023, reflecting a 9.3% increase from 2022. These visitors spent a record $1.7 billion, which directly affected the local economy.

Over $1 Billion in Developments Throughout Galveston

• Early last year, developers announced that they are in the beginning stages of constructing the $700-million Margaritaville Resort on 95 acres of land to the east of the island. Along with the 15-story resort, the development will include an expansive, elevated pool deck that overlooks the beach; a waterpark with a lazy river; a large ballroom; multiple restaurants; and 278 multi-bedroom cottages. This project will be the largest resort development in Galveston and the brand’s first lifestyle, ground-up resort development in Texas. Construction is slated for completion by 2026.

• Galveston’s landscape is evolving with major developments driven by the Galveston Wharves, including the $90-million West Port Cargo Complex and the groundbreaking of the $151-million and fourth cruise terminal complex at the Port of Galveston, where MSC Seascape will homeport from November 2025 onward. These port expansions signal significant economic growth and job creation opportunities in Galveston. This past October, Norwegian Cruise Line confirmed a ten-year contract to sail out of the new terminal once completed.

• Additionally, the new Engineering Classroom and Research Building at Texas A&M University, scheduled for completion in the fall of 2025, further contributes to the city’s transformation, enhancing educational offerings and bolstering Galveston’s appeal as a dynamic coastal destination.

• In addition to these projects, notable real estate developments, such as Roseate Beach (a 160-home beachfront community) and Tiara on the Beach (a ten-story condominium complex) are under construction in Galveston’s West End neighborhood. These ventures, along with a planned, $250-million, beachside, mixed-use development nearby, illustrate the city’s growing diversity and attractiveness.

Excellent Location Among Strong Corporate & Leisure Demand Generators

• The property benefits from its strategic location at the 61st Street Exit off I-45, a major thoroughfare for those traveling to Galveston Island.

• The property is proximate to numerous dining, retail, and entertainment options, which is a positive attribute for both business and transient guests.

• Corporate demand generators in the area include the University of Texas Medical Branch (UTMB), Galveston College, Texas A&M University, Landry’s, Moody Gardens, Moody Bank, ANICO, Mitchell Family Companies, and the petrochemical refineries in Texas City.

• Texas City is home to the major petrochemical refineries of DOW Chemical Company, Marathon, Valero, Eastman Chemical Company, and INEOS Styrolution America; these facilities generate year-round demand related to plant shutdowns and maintenance.

• Leisure demand generators in the area include Port of Galveston Cruise Terminal, Moody Gardens, Schlitterbahn Water Park & Resort, Pleasure Pier, 61st Street Fishing Pier, Galveston Island Convention Center, and the historic Downtown Galveston.

• The Port of Galveston ranks as the fourth-busiest cruise port in North America. In 2023, the port hosted 354 cruise-ship sailings, accommodating over 1.49 million passengers and reflecting a 42.0% increase from 2022. Additionally, it is on track to be the third most popular cruise home port in the United States and is recognized as one of the top cruise ports globally.

Candlewood Suites Franchise, 10-Year Agreement

• Upon the sale, an investor can expect a new, 10-year license agreement with InterContinental Hotels Group (IHG).

• The award-winning IHG® Rewards Club loyalty program is one of the largest in the hotel industry, offering members more choices to redeem their points than any other hotel loyalty program in the world. Serving over 100 million enrolled members worldwide, IHG Rewards Club is an effective tool for driving customers to IHG hotels and creating brand loyalty.

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