Another day, another dollar, or in this case 558 million dollars. Earlier this week a startling $558 million worth in hotel deals were made. Pebblebrook invested in two boutiques while DiamondRock acquired four hotels.

Pebblebrook now owns 23 hotels in the United States. The first hotel that Pebblebrook CFO Ray Mark reports investing in is the Hotel Vintage Park located in Seattle, Washington. The hotel was purchased for $32.5 million and Mark feels very positively about the future of the property in the the strong urban market of Seattle with a year to date RevPAR increase of 11%.

The Hotel Vintage Park Photo: hcareers.com

Additionally, Seattle is experiencing a high occupancy rate of 75%. But the Hotel Vintage Park tops the average occupancy rate with its 85% occupancy rate. The Hotel Vintage Park was converted into a hotel 20 years ago by Kimpton and has scheduled plans to renovate rooms and common areas in 2014.

Pebblebrook also bought the Hotel Vintage Plaza in Portland, Oregon for $30.5 million. As is in Seattle, Portland’s occupancy rate is 75%  while The Hotel Vintage Plaza is at 87%. The hotel was built in 1984 and was fully renovated in 2008 and until now has been managed by Kimpton like it’s Seattle counterpart.

The Hotel Vintage Plaza Photo: hcareers.com

Both of Pebblebrook’s newly acquired hotel’s were bought from private equity firms at a 25-35% discount to replacement cost and will continue to be managed by Kimpton. While both hotel’s have occupancy rates higher than the averages in their respective cities, there is not any new foreseeable supply in the future, so Pebblebrooke was wise to strike now.

While Pebblebrook made impressive investments in their newly obtained hotels, DiamondRock acquired an even more astounding four hotels from Blackstone this past Monday. DiamondRock now owns the 362-room Hilton Boston Downtown/Financial District,  406-room Westin Washington DC City Center, 436-room Westin San Diego, and 258-room Hilton Burlington. When all the math is said and done this $495 million of-the-market deal pans out to $339k/key. In addition to this, Blackstone will receive a $75 million stake in DiamonRock once the deal closes at the end of this month.

Hilton Boston Downtown/Financial District & Westin Washington DC City Center Photos: hotelsmag.com

In the past decade, the low cost of labor in countries like China, Taiwan, and the Philippines naturally caused a large amount of US furniture to be imported. We’ve especially seen this amongst hotel FF&E renovations.

But new reports from the U.S. Bureau of Labor Statistics, The Boston Consulting Group, and Old Dominion Freight Lines are telling a different story. With the inflation rate skyrocketing in China and high productivity in the US, cost of production is expected to be equal in China and the U.S. by 2015. This infographic looks not only at that productivity for furnishings made in America but also the disparity in freight costs when shipping large containers.

As consumers, we are not strangers to the tumultuous impact the recession has made on our wallets. Customers had to cut back on seemingly frivolous expenses during this period of economic stress, and luxurious trips to Las Vegas were not immune to the changes in spending. With frugal functionality on the brain, people are opting to spend their money at casinos closer to home- creating a dent in the Vegas title as the gaming capital of the United States.

Despite the bleak trend in Las Vegas hospitality and tourism,  the numerous and sizable renovations that hotels have recently made are slowly changing the game. Due to the number of large CapEx projects that key hotel players are making, the year-to-date visitor volume has increased 3.6% from this quarter last year.

The upgrades being made in both luxury and (comparatively) midscale resorts and hotels are not purely superficial facelifts or PIPs, but tweaks and tune-ups in services as well. The new era of renovation is benefitting the incoming traffic of Las Vegas, but it comes with a hefty price tag. Resorts need to provide an experience that consumers can’t get anywhere else- a calling card for Las Vegas that will get and keep people interested and willing to dole out the cash.

One resort that is tailoring their experience to the price conscious individual is the Tropicana Las Vegas. Since its building in the 1980′s the Tropicana hadn’t undergone a massive renovation until now- spending $180 million on upgrading guest rooms and public spaces. They added a 5 acre pool and club complex. The Tropicana also implemented a service upgrade. As a middle-of-the-road hotel in Vegas, the Tropicana has lowered it’s prices with the intention of creating a balance between offerings- making it appealing and possible for guests to spend at the hotel’s restaurants and clubs. One attraction the Tropicana has added is the taping of the popular show “Dancing with the Stars”- an example of hotels updating their attractions and guest experience.

Poolside lounge area at the Tropicana.

Luxury hotels, like the Bellagio and the Wynn Las Vegas, are updating their design schemes, opting for new and fresh color schemes. The Wynn Las Vegas in particular has had their furniture, fixtures, carpeting, etc. custom designed specifically for the Las Vegas powerhouse- creating a truly one of a kind stay.

Newly redesigned room at the Bellagio.

What has made massive revamping possible? As aforementioned, the recession has made hotel investors weary of backing such lofty renovation projects. The answer: the two prominant controlling companies, MGM Resorts International and Caesars Entertainment Corporation, are discarding some of their non-essential assets- creating the opportunity  for other corporations to profit. Additionally, as the macroeconomics of Las Vegas are looking up so is the credibility of the hotel industry- increasing the rates of investment and reinvestment.

In my last post, I studied the numbers and the macroeconomic effects on the hotel industry that the great brains from the Bisnow Lodging Investment Summit spoke about in DC.

While everything does revolve around the numbers, there were several panels that explored the innovations, traveler trends, and future of hotels from an experiential and development standpoint.

Technology [We're Not Going Off The Grid Anytime Soon]

Disappointingly, I was one of the few live tweeting during the conference with the #BLIS2012 hashtag, providing insight

Pebble, an E-paper watch for iPhone and Android, just raised $10 million in funding through Kickstarter.com

from great speakers in 140 character bites. [If you feel lost already, you need to hire our sister company OttoPilot Media to move you and your company into the digital age]. Many travelers consistently complain about the lack of outlets, especially in older hotels.

With the number of devices that we all have, and the desire to wander from the desk surface (I mean, they don’t call it a “lap”top for nothing), the power options are substantially limited. However, if you’re thinking of adding major electrical renovations to your PIPs now, rethink that. By the time you do that renovation, technology will have changed. You’re already behind.

Bill Fortier, SVP from Hilton Worldwide, reminded us on the development panel that the standard and acceptable Hilton TV is now 42″. This just shows a barometer of what a traveler expects–a home away from home with all the amenities. Technology investment will be required because customers will demand it.

Younger generations have three main requirements–control, connectivity, and immediacy. Hotels will need to learn to cater to these requirements to earn the loyalty of a typically unloyal consumer.

F&B Is Not Just About Restaurants

Sadly, food & beverage was previously seen as the redheaded stepchildren of many hotels. It’s been, at its nicest, referred to as a loss leader and many owners and brands have allowed F&B to be back burnered. From a trending perspective, panelists and speakers are now sitting up and taking notice of F&B again. It’s not that F&B has become profitable (in fact it’s rarely profitable in a union market), it’s because it’s an important part of the brand and travel experience. Jon Bortz, CEO of Pebblebrook, reminded conference attendees that F&B stands for “food and beverage” and not “restaurants”.

Starwood's aLoft brand has 24/7 F&B kiosks to serve their guests

As select service becomes more experiential, we are seeing hotels with pantries and limited-service offerings really embrace that idea of F&B.

It’s About the Experience

Across the board, just like we hear in digital marketing, there is talk of the consumer’s experience. Virgin Hotels’ Allie Hope resonated soundly with conference attendees by painting a picture of the Virgin experience. She was also one of the few speakers that spoke about having a targeted demographic. For Virgin it’s mid-30s, high earners, seasoned travelers, into social media, and well-educated.

Marriott seems to understand that people are looking for more unique experiences in hotels now with their Autograph collection; frequently, this is what

Turnberry Isle Resort in Miami- a part of the Marriott Autograph Collection

draws travelers to independents and boutique hotels. Through their Autograph collection, Marriott has picked up individually iconic assets with a heavier leisure mix than their normal properties. The collection includes 30 hotels–like The Carlton in New York and Turnberry Isle in Miami–and is the fastest grown full-service brand in the industry, ever (according to CEO Arne Sorenson). If you even visit the Autograph Collection website, it’s a very un-Marriott like user interface…and the word “experience” is used pervasively. Evidently, Autograph is symbiotic because, since adding the flag, average hotel revPAR is up 5-10 points.

Where is Hotel Innovation Going?

Unfortunately, there seemed to be a lot of reactive thought for what hotels should look like here and now, with today’s

"Ohhh, the files are IN the computer?" (Zoolander)

traveler and today’s technology. There was a real dearth of talk about the future of hotels. The conference brought tremendous insight on economic futures and what we can expect from financing, but innovation was another story.

In order for hoteliers to really understand what the future holds, they need to stop hanging out with and only learning from hotel people. Look to industries that are typically more cutting-edge–technology, sustainability, arts, entrepreneurship. Those are the industries that understand where this ship is going and what people are going to want in the future.

We’re on the right track with understanding experiential needs, but we are already behind by planning PIPs and CapEx projects with today’s technology and traveler in mind.

Last week, I was fortunate enough to join some of the brightest minds in the lodging and hospitality world for two days of panels and keynotes on putting together deals, CapEx projects, economic outlook, and more.

Across panels and throughout the Bisnow Lodging Investment Summit, there were definitive trends.

The US Government is Broken, Everyone Knows It, and It’s Hurting the Lodging Industry (and the Economy In General)

It seems like just yesterday the economy was stalling due to “what would happen in the midterm elections”. Eighteen months later, consumers and the market have just as much (or as little) confidence in what will happen in November. (Are we really going to do this every two years??)

As we know, when people feel uneasy about what will happen, it means certain paralysis. Bruce Wiles, COO at Thayer Lodging Group said that we will likely see a stalling in any deals getting done by August until the election.

My idea for ensuring prosperity for the industry

Former Director of the Congressional Budget Office, Doug Holtz-Eakin, said that we are in very big trouble due to the 6 major Congressional decisions that need to be made between elections and the end of the year–tax cut expirations, spending cuts, and another extension of the nation’s borrowing limit.

This proverbial “kicking of the can down the road” means that there is no cushion for the inevitable “bad things” that happen that few could predict. The lodging industry could suffer from a lack of financing due to uncertainty in the markets and will lose due to lack of consumer confidence. It all sounds vaguely familiar.

Also, don’t get Tom Corcoran, Chairman of the Board of FelCor started on the pool-lift legislation going through Congress currently. (Somehow we can’t manage to pass a national budget…but I digress).

Luxury Demand from China Is Big

Whether it be Chinese traveling domestically or those who want to travel internationally, there is a large demand from China for luxury. Arne Sorenson, new CEO for Marriott International, said that in the next few years, there will be more Ritz Carltons in China than in the United States. However, the consensus seemed to be amongst panelists that if you’re not already in China (and it’s a long process to get your first deal), it’s better to be in the US on a risk-adjusted basis.

Europe Could Be Catastrophic

The day before the conference started, French president Nicolas Sarkozy was defeated by Socialist party candidate,

Taking its cues from Ernest Hemingway (seen here in my hometown of Sun Valley, Idaho), Congress continues to kick the can down the road.

Francois Hollande. If Germany and France commence open sparring, the market will take notice. Portugal, Italy, Greece, and Spain remain questionable. Doug Holtz-Eakin noted the unrest in Europe and an increase in oil prices as his two major macroeconomic concerns.

Deals Are Getting Done…and There is Financing

A resounding tone throughout the conference was that there is money out there and you can get financing. It was noted that now is an especially good time for transactions before Bernanke increases interest rates in 2014. Several panelists said that they were buying caps now, or even fixing their debt if they intended to hold the asset for a longer period of time.

Major REITs are moving away from secondary markets and looking mostly at major markets on the coasts. DC remains a highly coveted market for hotel deals. Although Suril Shah, VP of Acquisitions for Starwood Capital Group, did say that they have completed more than 60 deals in middle-America markets and found those assets to be good hedging for their greater portfolio.

While there are likely to be more debt restructuring and foreclosures when $30 billion of debt in the CMBS market comes due in 2012, it’s not as daunting when we learn that many owners are finding financing and able to invest in bringing distressed properties back to par rather than allowing them to go into foreclosure.

Part two of this series to come where I’ll cover the asset management and guest outlook trends…

People go to hotels for many different reasons: luxurious rooms, top quality service, business trips, family vacations, etc. Most don’t choose hotels based on their swimming facilities, but these pools will make you think otherwise.

Image: Concierge.com

Hotel Fasano in Rio de Janeiro, Brazil dones this lovely pool. Underlite and heated this pool attracts the upper-class echelon of Brazilians. Rooms at the Fasano start at $530 (concierge.com). Dream under the stars in this top-of-the-line rooftop pool!

Image: travelandleisure.com

How about a hotel with the pool imbedded in the cliffside? Hotel du Cap Eden-Roc in France allows you to swim amongst the rocks, complete with a rope swing into the pool! The infinity edge on this cliffside pool makes it seem as if you’ll fade into the adjoining Cannes Bay. Swim among celebrities such as Bruce Willis and Kate Moss! (travelandleisure.com)

Image: www.santorini-hotels.info/katikies.htm#zoom

Looking for something a little more exotic? The Katikies Hotel in Santorini is a great get-away. Equipped with 2 pools, the Aegean architecture of this hotel in the small village of Oia is something to talk about. How about this pool itself? The pool is inside a cave not to mention the beautiful blue background. The cave pool found at this hotel is one of a kind. (santorini-hotels.info/katikies)

What are some of your favorite hotel pools?

What do hotel guests want? Hoteliers ask themselves the question all the time to increase room bookings and revenue.

Above all hotel guests want personalization, this can be accomplished in a variety of ways:

1. Engaged Employees

As HotelNewsNow.com has repeatedly stressed, satisfied employees mean satisfied customers. If employees have a sense of purpose and a more general view of how their job matters, the results will benefit everyone. Rooms will be cleaner, receptionists will be more welcoming, and the overall guest experience will be better and more personalized. If employees are engaged and motivated to develop relationships with the guests, the guests will notice.

2. Social Media 

The whole concept behind the success of social media is personalization. Allowing guests to express their experience on the hotel social media page (Facebook or Google+) and responding to them creates a personalized relationship. Guests feel they are being heard, and as a business, you get personalized feedback! It’s a win-win situation.

Social Media is also a great way to get more bookings. If someone’s friend ranks a hotel high, they are more likely to think more highly of that hotel. It’s word-of-mouth advertising, personal relationships rule!

3. Customized Products and Services

People aren’t looking for the subjective 5-star rating like they used to, people want a more personal feel with customized products and services. Because of new technology, competition, and readily available methods of comparing hotels; customers look until they get exactly what they want. Maybe that will be a Designer hotel or local food that appeals to them. Maybe a renovation would be a good idea to make your hotel less generic and more personalized. Whatever it may be hotels can cater to customers by giving them the tools to customize the experience for themselves.

By understanding what guests want, hotel owners can increase hotel room bookings and improve hotel revenue.

Do you agree that hotel guests want a personalized experience? What do you want as a hotel guest?

In the last blog post  guest personalization was stressed. These new brands of hotels take brand recognition to a large scale with actual designer hotels. Think big: Bulgari, Missoni, Armani, etc. This brilliant marketing campaign takes the brand recognition, loyalty, and ritz of these high-end designers and extends it to an upscale hotel! Check out some pictures from these places:

Bulgari Hotel, Bali:

Image: www.luxury-hotel-news.com

Bulgari Hotel, Milano:

Image: www.jaunted.com

Armani Hotel, Dubai:

Image: http://velvetpalette.wordpress.com

Image: http://velvetpalette.wordpress.com

Missoni Hotel, Scotland:

Image: http://www.hotelchatter.com

Like I said before these hotels take branding to the next level. It is a proven fact that people have brand loyalty, especially the upper class that can afford the designers listed above. So why not make luxury designer brand hotels?! Now not only can people wear their upscale designer brands, they can live them too (with the same loyalty no doubt!).

What is your favorite designer? If they had a hotel would you stay there simply for the name? I know if Kate Spade had a hotel I’d book a room in an instant!

No one argues the business-savvy behind Trump Organization, Donald Trump. The Trump empire is no small trump. Heck, the man has a whole show (The Apprentice) based around business success.

So what made Trump and his team invest an estimated $200 million in a new luxury hotel in Washington D.C.?

Image: http://thewashingtonlobbyist.com

1. Location

It’s the first rule of any real-estate investment: location, location, location. Hotels, as much as any other real-estate investment, must be in a profitable location to do well. Located on 12th Street and Pennsylvania Avenue, the new Trump hotel is in the middle of capital traffic. It is just walking distance from government offices and popular tourist destinations.

2. Demand

There are so many reasons to come to the capital: business, government, tourism. In 2011, hotel occupancy in DC was an estimated 69% compared to a nationwide occupancy of only 61%. The demand for Washington DC hotels is higher than the rest of the US.

Also, travel rates in general are supposed to be following an upward trend. Trump is trying to capitalize on increased travel to the capital in coming years.

3. Society’s Elite

Despite the demand for luxury hotels, a new one hasn’t opened in DC in years. Who is staying in Washington DC? Business people and government officials, the upper/upper-middle class. Society’s elite want to stay in the latest and greatest hotels. This is what you get with the Trump name, an insinuation of luxury, class, money. Trump knows his market and knows the demand for luxury hotels in a big city like DC.

Image: www.bestourism.com

4. History & Height

The new hotel will require renovating the old post office building, which is already a tourist destination. Trump has promised to preserve the historical features of the building in renovation. The building itself generates hype because its 315-foot clock tower which is the second tallest building in Washington behind the Washington Monument.

The hotel is expected to have a spa, more than 250 rooms, restaurants, and conference facilities. The mass publicity Trump has already gotten from this real-estate investment is profound. We’ll have to see how the hotel fairs in 2016 when it is due to open. Knowing Trump, it’ll be a gold mine.

Would you stay in the new Trump Hotel in Washington DC?

There are many reasons for the hospitality industry to choose purchasing companies, like Aspen Purchasing, that buy their products in the United States instead of China. But what are the benefits to buying FF&E in the US instead of China?

The general goals of hotel renovations are to deliver a finished product, as specified by the owner, on-time and on-budget. In the past Chinese products were cheaper and faster to deliver to the United States. This is no longer the case.

Image: Swifteconomics.com

Lead times on products purchased in the United States are significantly less, compared with lead times from China. Aspen Purchasing Associates recently came into problems with a vendor ordering glass from overseas and delaying the project. All renovations are time sensitive, especially recently as the economy is slowly moving out of its slump .

The extra time to get the product isn’t the only concern, however. With lag time comes quality control issues. If it takes longer to get a product, there’s more exchanging of hands and more time for the product to get damaged along the way.  If problems do happen the response time is inevitably longer because it takes so much longer to get the product in the first place.

Products from China aren’t necessarily cheaper either. China holds down the value of their yuan so their products appear cheaper to the US. But the cost of goods is a small fraction of any project. According to Alan Benjamin, president and founder of Benjamin West, in his article Bloom, Gloom, Recovery: Current Trends in FF&E he states “On average FF&E product is about 35 percent of a renovation, the majority of cost being made up of labor, freight, tax, fees, demolition, installation, etc.” Greg Sleter of Hotel Business Design affirms, “Combining shipping costs and other factors, there is far less difference in overall price between the US and China today than in past years”

Don’t be persuaded by a low upfront cost presented by China, US manufactured products are better for the overall financial health of a FF&E project.