Ashford’s Bennett talks industry consolidation
11 MAY 2015 7:23 AM
Industry consolidation continues to be a point of debate, with Ashford’s Chairman and CEO Monty Bennett the latest executive to chime in with thoughts on the topic.
DALLAS—Ashford Hospitality Trust’s Monty J. Bennett contributed his thoughts on industry consolidation during the real estate investment trust’s first-quarter earnings call Friday.
Prompted by an analyst, Bennett, the REIT’s chairman and CEO, said he has heard “a number” of REITs have expressed an interest in engaging in a consolidation transaction. Talk of consolidation has been a hot topic on a number of company earnings calls lately following an announcement from Starwood Hotels & Resorts Worldwide that said the company is exploring strategic alternatives.
“So, we’ll see if that happens,” he said of REIT consolidation during the conference call. “With the recent pullback in stock prices, I don’t know how eager they’ll be, but there is definitely a disconnect going on between fundamentals in the industry, which are very strong, never been stronger, and the outlook is very, very strong.”
Investors, however, have been cool to the industry during the past several months, due in part to interest rates. That is ironic, Bennett said, because in the past hotels have done well when interest rates go up due to it generally coinciding with revenue-per-available-room growth.
“I think that this investor sentiment regarding lodging that has been a little soft the past few months will definitely turn around because here very soon this somewhat negative sentiment is going to run smack into continuing very strong fundamentals and the fundamentals will win the day, ultimately,” Bennett said.
Year to date through 8 May, Ashford Trust’s stock was down 14.9%. By comparison, the Baird/STR Hotel Stock Index was up 1.4% through the same period.
Regarding Ashford’s own acquisition prospects, Bennett said the company’s deal pipeline is strong, but executives are keeping a close watch on pricing.
“We do think that we’ve got a number of years left in this cycle, and we think there is some great upside still out there,” he said. “And we’re looking, and we plan on being a net buyer this year. (Ashford) Trust does have quite a bit of cash and positive net working capital, $600-million-plus, so we’re very flush with the ability to acquire.
“And because a lot of the REIT peers are pulling back, that gives us an opportunity. So we’re going to be selective, but continue to look for opportunities because we do think that this recovery has legs and has quite a bit to go yet.” Ashford Trust’s portfolio consists of 116 properties comprising more than 25,000 rooms.
Ashford Select update
Bennett also provided an update on where the company stands in regard to Ashford Select. Ashford announced the launch of Ashford Select in January. It is dedicated to investing in premium-branded upscale and upper-midscale select-service hotels, including extended stay.
He said the company is continuing to talk to capital sources about whether to create some type of spinoff of the portfolio or whether to incubate the portfolio itself with Ashford’s own capital, and then spin it off some time in the future.
“Select service continues to do very well, and we think that’s a great sweet spot in the industry and there is just a lot of public market REITs that focus in that sector. And so we think that’s a great opportunity,” he said.