Los Angeles – During the luxury and lifestyle session at the investment summit of the Americas (Alis) last month, the conversation included a discussion to know if it is better to build or buy today in these high -end segments. The clear answer, and to no one’s surprise was to buy to avoid the multiple risks surrounding the building today.
Yes, there have been a few exceptions mentioned, but with the cost of replacement, on average, at 45%, according to the Panelist Carolina Bernal de Jll, the purchase has more potential.
The conversation then turned to the question of whether a newly acquired asset should have the support of a big brand to prosper. David Duncan, president and chief executive officer of First Hospitality, Chicago, said that even if it depended on the location and attributes of the building, the self -employed can succeed and, if they do, make a much higher profit to the buyer.
“We consider real estate as a very local business, and our Hutton Hotel in Nashville is a good example,” said Duncan. “The hotel is alone and has succeeded as an independent hotel for some time. We reinvent this with a good amount of capex. »»
If you can find an asset that needs a little love of capital, from the point of view of the brand image, and to do it well, you do not necessarily have to excite too much in the best marble or the best spa to bring what we think is really the sweet spot of what we do, which is this experience.
David Duncan
Duncan said that in this particular case, FIRST Hospitality had examined the market, Nashville, Tennessee, with solid incoming trips and judged that they did not need a brand according to the location compared to compromises and residual assessments and at the pipeline of potential customers.
“But in other places, we would say” absolutely you need a brand, “continued Duncan. “So we really look if the hotel is in a place where there is enough request to generate sufficient use, a sufficient test or, if not, what brand do you need?”
During the choice of a brand, Duncan called the decision “an interesting puzzle match” according to what the location, the brand’s flexibility really looks like for the location, which the brand offers in terms of customers, pipeline and percentage of travelers from the brand family, and Cetera.
“This is one of the things we really studied very closely at first (with the Hutton),” he said.
To return to the question of construction in relation to the purchase, Duncan said that there were today incredible purchasing opportunities and the real ideal point in real estate investment has always entered the search for a lover base for development.
“Today you can buy at a replacement cost,” continued Duncan. “If you can find an asset that needs the love of the capital, from the point of view of the brand image, and to do it well, you do not necessarily have to excite too much in the best marble or the best spa to bring what we think is really the ideal point of what we do, which is this experience.”
Again, Duncan has referred to the Hutton, which is located near many music places, and it turns out that the hotel has a studio just behind the building where the artist writes and collaborates. He mentioned it because he said that he could put on the customer’s impression from the first time they hear about the hotel in the experience they have when they cross the door for the first time, including the way they are welcomed, the team’s outfit, etc., gave them the impetus to buy the asset to a relative discount.
“Be very thoughtful on the brand or theme or experience that you bring to this place because in my own experience, there are many people who have built very beautiful buildings that do not necessarily offer a higher return.”
He closed, adding that the opportunity is to make sure to buy a discount at a replacement cost and deliver history to the customer authentically. “From the point of view of investment, there are real good opportunities there.”