Main Street Investors Seize Hotel Deals as Wall Street Wavers

While Wall Street investors hesitate, their Main Street counterparts actively seize opportunities within the hotel industry, highlighting a risk versus reward mindset many smaller, nimble owners possess.

A marked contrast has emerged between Wall Street and Main Street investors in the realm of hotel investment. While Wall Street investors show restraint, their Main Street counterparts demonstrate an active, risk-embracing stance. This divergence in strategies underpins the current dynamics in the hotel industry.

Ark Holdings Group CEO Azim Saju embodies this risk-taking spirit, stating, “Get deals done. There will always be reasons not to—high gas prices, geopolitical uncertainty. But if there wasn’t a risk component, there would be no reward.” Ark Holdings manages 80 hotels, owns 16, and has five under construction, with more in the acquisition pipeline.

Neil Amin, CEO of Shamin Hotels, echoes Saju’s mindset, underscoring the importance of growth and the risks of over-caution. Shamin Hotels, an owner, operator, and developer, has 60 hotels in its portfolio, with eight in development and more potential acquisitions in sight.

Concord Hospitality, another owner-operator company, also actively invests in hotel construction. Concord President and CEO Mark Laport reports seven hotels under construction, noting that while the market isn’t “wide-open,” conditions are improving.

These industry leaders, among others, participated in the “Main Street Talks” panel at the Hunter Hotel Investment Conference, where they discussed the pros and cons of building versus buying hotel properties.

Amin highlighted the post-pandemic market shift, noting a significant performance difference between new-build hotels and even fully renovated ones, underscoring the company’s development plans. Reflecting on the costs and challenges associated with property-improvement plans and renovations, Saju agreed, stating, “Renovations, if done right, can get you there, and your basis usually is lower. But you’ll go through the pain.”

As Saju emphasized, pursuing hotel deals today carries real risks. He stressed the importance of carefully examining each deal and maintaining realistic exit cap rate expectations. Laport added that the compression of cap rates has made it easier to meet buyer expectations this year.

Despite the risks, interest in hotel deals remains robust. Brian Quinn, Chief Development Officer for Sonesta International Hotels, mentioned a 114-hotel portfolio worth over a billion dollars set to close in the coming months, attracting bidders from venture capital, private equity, and institutional buyers.

While Main Street investors actively pursue deals, they also share Wall Street’s concerns about political and economic uncertainties. However, they see these uncertainties as opportunities rather than deterrents. As Amin, whose hotels have been impacted by cancellations due to political uncertainties, noted, “This is our chance to buy some great assets in D.C. We’re contrarian. We go against the flow and develop when others are not and buy when others are not.”

While Wall Street hesitates, Main Street hotel investors continue to make deals, underlining the risk versus reward mindset that smaller, more nimble owners can bring to an uncertain market. Despite challenges, these investors see opportunities and are willing to take calculated risks to seize them.

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