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

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.