Dissatisfied guests at a Hilton Garden Inn in downtown Austin, Texas, have reviewed the hotel as “very run down” and “janky,” in reference to faulty elevators. One guest said the beds were “rock hard,” and another called the place “a complete nightmare from start to finish.”
Because of future capital expenditures required for the struggling hotel, acrophyte said it sold the property in part. The company paid about $100,000 per room, and plans to spend another $65,000 per room on renovations, including updates to the restaurant, meeting areas and lobby. Acrophyte Hospitality Trust, a Singaporean investment firm, sold a Hyatt Place in Memphis in July for $6.9 million, a 10% discount from its valuation in December. New room additions are running at a rate of 0.5% of existing hotel supply this year, well below the long-running average of 1.6%, Freitag said.
“It’s gonna be sparkling,” said Drew Bridges, an executive at JMI Realty, which bought the 254-key Austin hotel in June. Another factor underlying investor enthusiasm for hotel purchases is the low supply of new lodgings. The gap between the cost to build and the cost to buy an existing hotel has widened.
Hotel brands typically require owners to make improvements, such as refurbishing rooms and updating lobbies, every 7 to 10 years. In April, Ashford said the sale of six hotels in its portfolio would save the company $60 million it otherwise would have spent on property upkeep.
Bridges said online complaints about hotels in decline are useful data as the company looks for new investment opportunities. A number of such hotels won’t get refreshed until they finally sell, said Greg Friedman, chief executive at Peachtree Group, a company in the market for properties where owners are late to make updates. Meanwhile, data-center construction remains a boon to hotels; business activity associated with the massive projects, including construction, is adding to bookings across the country. And stock-market earnings are fueling travel demand from wealthy customers. But many hotels, especially those facing steep debt payments, have been low on the cash required to renovate and are behind schedule. Peachtree is in contract to buy one such hotel in the Florida Panhandle. He is using artificial intelligence to crunch negative reviews from guests on websites such as Yelp and Tripadvisor to help identify just how banged up a potential hotel investment is.
The Austin hotel that Bridges’s company bought was owned by Ashford Hospitality Trust, a publicly traded hotel owner that has sold several hotels in the last year to pay down debts.
