The hotel sector was undoubtedly hit by the coronavirus pandemic, which halted travel almost entirely. However, certain elements of the market remained resilient and are now attracting considerable interest from investors, hotel management companies and hotel groups. Demand for extended-stay hotels rose by 8.6% in Q1 2021, according to the Highland Group.
Despite this strong growth, the success of a new extended-stay hotel, or any new hotel, is not guaranteed, consumer intelligence technology firm Buxton Vice President Strategic Accounts Jack Hall said. There are many market factors that influence a hotel’s success, on top of how it is managed, particularly since the pandemic. To be able to make an informed decision about what the right and wrong opportunities are, data is key.
“The hotel market is very active right now, so you can’t take a year to evaluate a property or piece of land,” he said while speaking at the recent Bisnow Lodging Investment Summit in D.C. “You need to have that data at your fingertips, to be able to look at a map, click on a location and see whether it is right for you. Only then can you make fast, informed decisions.”
Hall highlighted how companies are particularly interested in acquiring distressed assets, as well as opportunities for new-build properties. Several panelists at the BLIS event highlighted how investors from other sectors are currently interested in acquiring distressed assets. Peachtree Hotel Group CEO and Managing Principal Greg Friedman commented during a panel focused on hotel financing how “the headline of distress in hospitality has attracted new buyers, such as multifamily trying to jump into lodging.”
The challenge lies in understanding whether an asset is distressed due to poor management, or whether wider market factors are at play.
“The way to vet that is to assess the market fully,” Hall said. “Are all hotels in the area distressed, or do they have demand around them? Similarly, you could look at a piece of land for a new build and think it could create an awesome hotel, but potential risks are written all over it. You need to determine whether there are the right types of businesses nearby, with the right mix of business and leisure guest traffic. A market with the right type of restaurant, entertainment and cultural offering that matches your target clientele succeeds.”
Once the data about the market has been gathered, Hall added, this can then be used to benchmark the opportunity against similar properties in similar locations. However, to do this, all the data about the company’s existing locations also needs to be pulled together. Even if a site poses a good opportunity, it has to be right for that particular brand and target clientele.
“If you don’t have a data-driven audit of your portfolio, you’re benchmarking against nothing,” Hall said.
One company that uses analytics to inform its growth strategies is Marriott International. Buxton has been working with Marriott for more than a decade, helping the company assess its portfolio and identify the right opportunities. Buxton has centralized Marriott’s data into one platform to help it visualize where its top scoring opportunities are and identify sites for potential expansion.
At the BLIS event, Mariott International Global Development Officer U.S. and Canada Noah Silverman spoke about how working with Buxton has enabled the company to make faster, more informed decisions.
“We’ve used Buxton’s predictive tools to identify markets and work through them with our development partners,” Silverman said. “We’ve used the data to focus on particular sites where we know hotels under one of our flags will be successful, and what that flag might be. That process has been a very effective tool, to ensure not only we’re able to grow, but our partners are able to grow with us.”
The Journey Of The Guest
The amount of data available about a market has jumped significantly in the past few years. Hall said that the information companies are most interested in today tells the journey of the hotel guest. Buxton’s tools that center around mobile GPS data analysis provide granular, anonymous information about where a person is traveling and spending money.
“Was it a business or leisure guest?” Hall said. “Where did they go? Where did they come from? And within the market that they came from, where are other people who look like them living and working? Is my type of guest spending money in this part of the market? Buxton’s proprietary technology and analysis follow that guest’s journey through the market in the U.S. to drive new hotel insights.”
Using this information not only helps to make investment decisions, but it can also help marketing teams shore up their performance efforts, Hall said. They can focus spends on the people who they know look and act like a traveler who has already visited their hotel.
At Bisnow’s BLIS event, Wyndham Hotel Group Chief Development Officer Chip Ohlsson spoke about the importance of understanding which brand within a portfolio each guest was staying in, so as not to target the same guest with both brands. Some hotel groups are diversifying to develop hotels that appeal to different segments of the market.
“You’d better know which guest you’re going after and not market all five hotels to the same business traveler,” he said. “It’s OK to polarize your brand. You don’t need to cater for everybody. What a lot of people now realize is there are lots of types of guests.”
All of the speakers at the event concluded that the market is seemingly full of opportunity post-pandemic, now that business and leisure travelers are again on the move. When armed with the right information, expansion could be in the cards for many.