Generally speaking residential yields are much lower than hotel yields, the happen to offer lower risk profile, there's more customers, there's higher occupancy, and generally speaking residential also tends to correlate with house price inflation, which is different than the hotel business so resi values tend to go with house price values, and so as an investor you look at both the cash flow and the value side of things. Whereas in the hotel it tends to be that the cash flow is directly correlated all the time with the value. And so, yields tend to be lower, but capital appreciation can be higher, in resi than in hotel.

Why do it? Because number one, if you don’t, somebody else will. And we’re already seeing the first hotel chain that's tied up with a retailer coming together to go in there. They’re going to bring their retail marketing ideas over. Secondly, it provides an ability to monetise the wireless. So you could put great wireless in, so you've taken away the worry about having to have great wireless and it being a complaint point, but you've done it in a way that it pays for itself by increasing the spend of your customer when they're on site with you by personalised their visit.

I've set the first student fund up in the UK in 2000, and if anyone said to us at that time that that was going to be a massive alternative asset class the way its grown, I mean you wouldn't have believed them. It's amazing the way that one has developed, and one of the main reasons it did develop was Nick Porta at Unite did a lot of R&D on what the customer wanted, so he made sure that the size of the unit was the right size for the student, that the services that the student got was exactly what they wanted and Unite have been incredibly successful as a result. And then now we're seeing some of these, interestingly hostel type operations, I mean they have existed, but of course now they're a bit flashier, 'cause they're actually what some of the student accommodation blocks, you take Edinburgh for instance, you know they have a reduced weekly tenancy, say forty two weeks in the year, the rest, they they, pack a single unit room, that they put six beds in. And they operate it on a hostel basis. Because one of the interesting thing with host - with hostels is, you can have a hostel without having a bar. Actually, as it happens, the bar is an important ancillary income source for the operator, whereas in the student accommodation you daren't have one! It doesn't go over particularly well, so, I mean every, every sector has a nuance. Private rented sector can be colossal in terms of the investment opportunities as compared to student housing. And actually as compared to hotels. You know, youngsters now, can't afford to buy their own houses, because the deposit that's required is enormous the mortgage market reviewer has made it difficult to get a mortgage, so actually the provision of rented housing in the UK is a massive need, whether it be affordable, whether it be mid-market, you know, for youngsters just leaving university it's got incredible opportunities and it will become within the next five years a major asset class, as hotels are.

Hospitality trends are more positive as regional markets recover from the recession. In this TV show Anne Walsh shares her insight into the Irish hospitality market.

Ireland, banks, and hospitality trends

What we are definitely seeing now is we’re seeing more transactions. So say in 2008, 2009, 2010 we saw very few asset sales. But in the last year alone we saw 200 million Euros worth of asset sales in Ireland. And we’re foreseeing a lot more of that going forward because seen now that we release assets into the market, we have banks, some foreign banks are exiting the market. And we’ve also a bank that’s currently being liquidated, IBRC. So we’re going to see hotels change hands. So I think the structure of ownership is going to be very different. You know, we’re seeing hoteliers maybe buying back hotels but we’re also seeing a lot of international money coming in. So definitely the profile on ownership, we’ll see new brands come into the market I think in terms of management contracts and franchising. And we’ll also start seeing more recovery in the regional markets whereas in Dublin we’ve been seeing double digit RevPAR growth for the last three years but that hasn’t been reflected in the other regions. But we’re starting to see a lift there as well. So hopefully in three to five years’ time all regions will have recovered and it will be a stronger market.

There will be more interesting discussion on regional hospitality trends on the Hospitality Channel. Keep an eye out for the next experts announced as part of Hospitality250.

 

Family office investors are looking for opportunities in hospitality and leisure according to James Innes of Chrystal Capital Partners LLP, who explains further in this TV show.

Family office investors in the MENA region

Family office investors are very similar to institutional investors in terms of what they look for. They are looking for strong management scenes, robust businesses, they’re looking for growth scalability. They’re looking for things within the MENA region specifically which are going to benefit from the overall macroeconomic situation, so those industries which are going to benefit from five percent GDP growth, the boom in population, the expansion of the middle classes, the deregulation of legal financial situations. So in terms of specific sectors I think retail, consumer, hospitality and leisure obviously are all key sectors which the families are looking for.

Hospitality TV will continue to follow discussions around family office investors and other funding sources for the hospitality industry.

The tourism industry has peaks and troughs like any other. In this TV show Rutger Smits of Al Rayyan Tourism Investment Company (ARTIC) discusses taking a long term view of tourism.

Tourism industry winners

If you invest in the hotel sector you have to take a long term view.  The tourism industry is cyclical.  I think overall, you’ll see that the tourism industry for those who know what they’re doing and investing wisely, can provide higher returns than any other asset class.  But you have to take a long term view.  Yes, you can be speculative and build for a boom, and get caught out by, you know, something that just goes bust all of a sudden. But it’s the long term investor I think ultimately that wins, and that’s our view.  We are buyers, we’re not sellers, we’re buying assets to hold them, to reposition them if necessary, to keep investing in them and make sure they keep on performing well so they can withstand the test of times and the cyclicality of the market.

Browse The Hospitality Channel for more fantastic videos on tourism industry issues and trends.

Dubai's government sees development potential in values hotels according to Lo'ai Bataineh, who discusses facilitating the needs of the Dubai youth in this TV show.

Youth market creates hotel development potential

Two years back we came up with a fund and that fund was particularly investing in these particular assets.  And we were targeting actually low scale hotels.  And apparently this was big demand, for example now, Dubai government they are making things or facilitating to come up with more hotels in this category in order to attract young people to travel and to spend more time and money. And you know, I believe there is shift and quality of thinking across the youth people across the region to travel and to explore more opportunities or explore more countries and enjoy their life, a matter of saving.  And I think there’s shift in thinking in terms of saving money, everybody willing to consume more or to spend more in order to tap certain needs and requirements.

If you are interested in Middle East markets and development potential then keep browsing The Hospitality Channel for more fantastic videos on these and related subjects.

Hotel real estate ownership has transferred over the past 25 years from brands to banks. In this TV show James Chappell discusses straddling the world of real estate owners and hotel operators.

The hotel real estate overhaul

Our clients really are the people who are involved in the owning of the real estate, that community in the industry. And so we work with banks with individual owners, with real estate investment trusts, basically anybody who owns a hotel real estate asset. I mean 20-25 years ago the real estate asset itself was owned by the brands and they went under, they went though a process of selling off the family silver if you like. They decided are we in the hotel real estate business or are we in the hotel operation business? And there was a real separation and they decided very clearly that actually, we're not real estate guys we are hotel guys, and so 20 years or so ago you had a big inflow of hotel real estate into the market, which was then snapped up by, at the time it was banks, property companies, high net worth individual's trusts that were set up specifically to deal with hotel assets. And what that did is it created a need for a level of skills that was part hotel, part real estate, and it was a skill set that really wasn't there in the marketplace before, so a lot of what Horwath HTL does is we act if you like as a translation service and we straddle both worlds between hotel real estate between the investment community and the hotel operating community, because one of the interesting things about a hotel asset is that unlike other real estate asset classes like commercial or residential or retail, the value of the underlying asset is very closely linked to the performance of the property and so it is very difficult to separate the value of the underlying hotel business from the real estate itself, so you relay need expertise in terms of how the business works, how the contracts are structured and how they work etc.

The Hospitality Channel will continue to bring you videos related to hotel real estate and surrounding issues.

In the hospitality industry, development and growth are strong once again. Russell Kett of HVS discusses how developers are confidently seek equity.

Positive industry development

All the pointers are up.  Everybody’s excited.  Investors are excited.  The banks are here in droves.  There are people here with developments to try and get people interested in and they’re even getting a good hearing.  The operators are buoyant. In my business, we are really based around two types of deals.  One is that we have a business which actively sells hotels.  And the other side of our business is the advisory side, whether we’re doing some valuations of hotels, we’re dong feasibility studies for new hotels, strategic advice and so forth.  So on our agency side we’ve been hugely busy selling peoples’ assets and that side of our business which is called HVS Hodges Ward Elliott. We’re obviously known as valuers and we value hundreds of hotels every year, even out of the London office alone.  But what’s perhaps been more surprising in the past 12 months is how many people have come to us with feasibility studies that need to be done.  So that’s encouraging in the sense that the new development market is picking up fast.  And they are hiring us on the basis that they feel confident that they’re going to get funding, they’ve either got equity behind them or they’re confident of getting it. Some people are using our work to help them to find the debt and they’re confident of getting the debt before they’re even hiring us. So I think that’s an encouraging sign of the industry that that side of the business is on a more upward trend.  We’re also getting more involved in helping companies determine their strategy for the future, how they should be growing and maybe how their brand should be developing and so forth.  And again that’s encouraging, people are putting behind the sort of batten down the hatches, get our costs down, you know, keep surviving at all costs to saying, well now let’s look to the future, let’s look to how we can grow, how we can expand and so forth.

If you are interested in industry development and business growth, why not browse more TV show on The Hospitality Channel.

Hotel products are bought and sold by The Blackstone Group. In this TV show Gabriel Petersen discusses how to best position the hotel for the sale.

No tricks to sell hotel products

I think the message is that the same way we have to sell a lot, we have to buy a lot, so we do both. No matter how smart you try to be the reality is, the market is the market. There’s no point in making the old silly tricks to try to… of course you put your best for forward, you try to be very transparent as to what the asset does, and then you let the buyers and the bidders just factor in whatever they want to factor in, in terms of what they want to do with an asset. From the brand perspective if you have an interminable franchise agreement and management agreement that helps if you are selling VP. It gives optionality to the buyer which is much wider that if you’re just selling within a specific brand, where they get just stuck with that brand, so optionality on the brad side is also key, but that’s not something you choose, that’s something you have. You either have or you don’t have. So you need to adapt your strategy for exit depending what the situation is from the brand point of view. The Hospitality Channel will have videos about all aspects of the industry, including more on buying and selling hotel products.