In the News – Alex Nielsen

Hospitality broker Alex Nielsen discusses with ABC 4 News the hospitality market.

1. How will inflation impact a hotel’s performance/ consumers in 2022?

• There are two primary impacts of inflation on hotels:

1. 1. Owners should be able to raise rates
   2. Owners will pay more for labor/supplies

• Hotels offer an inflationary hedge to real estate investors because of all the product types, the length of tenant stay is the shortest. You can raise rates daily vs. other product types that take years to change lease rates.

2. What is Mountain West seeing in the current hotel transaction market?

• Robust Hotel Transaction Market
  • 269% increase vs. 2020
  • 32% increase vs. 2019
• Since 2021, we’ve sold 15 hotels totaling $113 million in volume
• Resort/Destination markets at top of buyer’s preferred locations
• Interstate markets proving resilient
• Urban markets bouncing back

3. Projections for 22/ How is Mountain West advising clients?

• Direct project costs are skyrocketing – case goods, carpet, labor.
• This is going to make acquisitions and ongoing ownership very expensive.

4.  What is the state of the current hotel transaction market?

• Robust Hotel Transaction Market
  1. 269% increase vs. 2020
  2. 32% increase vs. 2019
• Resort/Destination markets at top of buyer’s preferred locations
• Interstate markets proving resilient
• Urban markets bouncing back
• Private equity represented 50% of volume in 2021
• Since 2021, we’ve sold 15 hotels totaling $113 million in volume

5. Do you think it’s currently a buyer’s or seller’s market?

• Seller’s market – All listings in 2021 received multiple offers, several deals trading at or above list price.
• There are simply more buyers than sellers right now, and the buyers have raised more money than they can deploy. It’s forcing buyers to overpay so they can place capital.
• With interest rates rising, buyers are eager to place capital while they can at lower interest rates.

6. What is the biggest problem you see for hoteliers in 2022?

• PIPs – franchises have been forgiving on property improvements over the course of the pandemic. We’re starting to hear that they are putting their foot down and requiring improvements to be made
• Direct project costs are skyrocketing – case goods, carpet, labor.
• This is going to make acquisitions and ongoing ownership very expensive