|Kenneth Cruse (right), president and CEO of Sunstone Hotel Investors, responds to a question from panel moderator Jeffrey A. Horwitz of Proskauer, during the NYU International Hospitality Industry Investment Conference.
NEW YORK—The hotel industry saw two large acquisitions during the past month—The Blackstone Group picked up the Motel 6 and Studio 6 brands from Accor, and Marriott International announced a deal to acquire the Gaylord Hotels brand. If the big equity players in the United States have it their way, there will be more deals where those came from.
All of the panelists—representing real-estate investment trusts—during a session at the NYU International Hospitality Industry Investment Conference titled “Mergers and Acquisitions in the Lodging Sector” said their companies will be net buyers during 2012.
On the private side, Mit Shah, CEO of Noble Investment Group, said his job is to buy hotels, create yield and then sell that yield.
“Right now, we have $1.3 billion in assets. It would not surprise me if we get rid of some of that and then build another fund—maybe a $1-billion fund—to acquire more,” he said.
While acquisitions haven’t occupied a primary component of Sunstone Hotel Investors’ strategy during 2012, the company is pursuing “carefully disciplined” growth.
“Acquisitions need to be made at the right time in the cycle,” said Kenneth Cruse, president and CEO of Sunstone.
Summit Hotel Properties plans to grow “with the best brands in the best markets,” according to CEO Dan Hansen. Recently, Summit has quietly acquired 10 hotels in primary markets across the country.
HEI Hotels & Resorts has shifted its growth strategy, recently entering the select-service space. HEI has traditionally been full-service players, chairman and CEO Gary Mendell said.
“It’s a bigger pond to fish in,” he said. “We want to be a larger company to grow faster, and we weren’t finding enough opportunities in full service.”
Mendell said select-service hotels will make up approximately 20% of HEI’s portfolio moving forward.
Shah said Noble is looking for “broken deals,”—hotels that are operating well but have poor capital structures. He said Noble has found a niche with hotel deals that require approximately $10 million to $15 million in equity—too much for the small, private investors and too little for the REITs.
W. Ed Walter, CEO of Host Hotels & Resorts, said the transactions market has slowed a bit since the beginning of the year. For that reason, Host is marketing some properties—“testing the market to see where pricing will be,” he said. However, Host would like to be a net buyer in 2012, Walter said.