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| Ed Watkins moderates a “boutique leaders speak out” panel starring (from left) Mark Durliat, Richard Cotter, Chris Pulito and Brian Scheinblum. |
MIAMI BEACH, Florida—In the four years since the recession began, the outlook buzz phrase at virtually every hotel conference has been “cautiously optimistic.” Finally, experts in the hotel industry are starting to drop the “cautious.”
Take Steve Rushmore, key speaker 21 October, the last day of the third annual Lifestyle/Boutique Hotel Development Conference at the Fontainebleau Miami Beach. Not only did the founder and chairman of Hospitality Valuation Services have an upbeat viewpoint, he backed it with statistics and attitude.
Markets of value volatility like Miami, New York, Los Angeles and Las Vegas will continue to reward investors willing to take risks to develop hotels, he said. In 1987, when he launched HVS, the value of a U.S. hotel room was US$37,000; by 1991, it had dropped to US$27,000. During the past 25 years, such value has increased exponentially despite seesaw spells. In the recovery of 2004-2006, it rose approximately 25%, but from 2007 to 2009, it plunged—a 31% drop in 2009 was the largest he’s ever documented. Despite that downturn, recovery has been rapid. A New York City hotel room peaked in value at US$100,000 in 2006; Rushmore predicted that would rise to a new peak of US$104,000 by 2015.
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| Hotel valuation guru Steve Rushmore said a boutique hotel is less than 150 rooms, has mirrors that slant, spaghetti chairs and a staff dressed in black who are either unemployed actors or models. See his full presentation. |
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Between 2006 and 2009, value of hotel rooms in West Palm Beach-Boca Raton, Florida; Las Vegas; and Phoenix dropped most, respectively US$148,000, US$142,000 and US$122,000. During the same period, value rose in Pittsburgh; Washington, D.C.; and Buffalo, New York, with upticks of US$3,000, US$23,000 and US$27,000, respectively. The reasons, in order: discovery of shale oil; the change to the Obama administration; and the strong Canadian dollar versus its weaker U.S. sibling.
Do market diligence, he suggested, adding strong destination and convention markets always are a good bet.
In 2011, Rushmore said, San Francisco will lead the increase in hotel value over all the 52 markets HVS tracks. The reasons? Historically low capitalization rates of 4% to 5% reflecting record-low mortgage rates; virtually no supply growth; depressed net operating income levels; and plentiful equity capital.
To minimize volatility, developers should pick safe cities like Orlando, Florida; New Orleans; Seattle; Tucson, Arizona; and Minneapolis. They should avoid high-volatility spots like Jacksonville, Florida; Philadelphia; Charlotte, North Carolina; Houston; Anaheim, California; and Detroit.
He said now is the time to buy a hotel. But he would wait until 2013 or 2014 to sell, particularly in Albuquerque, New Mexico; Norfolk, Virginia; Nashville, Tennessee; St. Louis; or Buffalo—markets “that will not show as great increases” as others. He also suggested independent boutiques with food and beverage do better than brand affiliates and/or foreign boutiques. Among the reasons: no franchise fees, lower administrative costs and marketing fees.
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Looking South
Warm weather and sun continue to lure hotel developers to Miami and points south, according to members of the final conference panel, moderated by Ed Watkins, editor of Lodging Hospitality. Among the hot spots: Miami; Colombia, particularly the tourist-friendly coastal city of Cartagena de Indias; Brazil; and Cuba.
Among the advice and takeaways:
• Differentiate your property;
• tell a unique story;
• be extra-patient if you want to do business in Cuba, which badly needs infrastructure modernization;
• work social media hard;
• look past the dangerous areas of Mexico for tourist opportunities;
• Brazil is dynamic and the World Cup in Rio de Janeiro in 2014 will generate enormous and long-lasting tourism;
• work with the online travel agencies, even if you want to “get off the crack,” as Richard Cotter of the Brilla Group called them; and
• don’t be scared of distressed properties.
Brian Scheinblum, co-founder and president of South Beach-based Cambean Hospitality, said securing LEED Gold certification for his Clifton Hotel helped market it to sustainability-loving customers.
Mark Durliat, CEO of Grace Bay Resorts, a Miami-based developer with a resort in Turks & Caicos, said his sales team works with “virtuoso” travel agents, high-end tour operators and the press to tell its story. Telling that story—relentlessly and creatively—is key.
Christopher Pulito, COO of Mirbeau Hospitality Services, said the full-time social media coordinator Mirbeau employs “pays for herself 19 times over,” posting daily “on every version of what we’re doing.” Mirbeau manages resorts and spas in the Northeast and Mid-Atlantic United States.
Richard Cotter, executive VP of asset management for Brilla Group, a real-estate investment firm with a portfolio spanning The Tides on South Beach and Cap Juluca on Anguilla, British West Indies, suggested Mexico isn’t as dangerous as the media portray it.
He also said Brilla is looking into developing in Cartagena in Colombia, which he called a “dynamic country.”
Better airlift would help develop the Caribbean, which Durliat called “the center of boutique.” Some customers like flying from island to island, finding tiny historic places “that offer a really special experience.”
