Brokers help `tired' hotels reinvent themselves
Houston Business Journal - by Jeffrey Bair Special To Houston Business Journal
Never discount the value of a good business contact.
Tandy O. Lofland, the president of a Houston hotel brokerage with a broadening worldwide practice, recalls how a personal connection recently led to the $7 billion renovation of two South American hotels.
Lofland's clients, the owners of hotels in Argentina and Uruguay, had tapped out the resort market there and wanted to sell.
His 20 years of arranging hotel sales had included several meetings with Frank Orenstein, a former executive at the Four Seasons Hotels and Resorts company, the prize catch in Lofland's field of buying and selling hotels.
"Everyone and their brother has a hotel they want to sell to Four Seasons,'' Lofland says. "But it is difficult to get in the front door with them.''
Lofland, the president of Intergroup Realty, had maintained his connections with Orenstein. Orenstein, an executive at Hospitality Investors Group of Scottsdale, Ariz., had maintained his connection with Four Seasons, which had a strong presence on every continent except South America. (The Canadian chain operates a $300-a-night hotel on Lamar Street in downtown Houston.)
Orenstein led Lofland to Four Seasons like a bellhop taking a traveler to his room. A few months later, the deal was done. A former Hyatt hotel in Buenos Aires, Argentina, and an independent hotel 25 miles away in Carmelo, Uruguay, are reopening in December as Four Seasons resorts. The 44-acre resort in Carmelo will have a polo field and some family suites with four bedrooms.
"Those hotels had hit a plateau. They had reached a level they were not going to rise beyond," Lofland says.
CHANGING HANDS
Such "rebranding'' of hotels is how the industry eats its young. The phenomenon drives most of Lofland's business. Savvy hotel managers know that business travelers are fanatically loyal to hotel chains, and a hotel that failed under one sign easily might thrive under another.
For example, a Spanish client of Lofland's recently paid $325 million for 16 Wyndham hotels in the United States and is reopening them as Sheraton, Four Points and Clarion hotels. Another client is changing six hotels in Holland and Belgium to the Holiday Inn and Crowne brands.
"The changing of a brand is almost always a question of renovation. Hotels get tired. They need a new look every five to 10 years or so,'' says Lofland, whose office is near The Galleria.
His company's newest business, Intergroup Capital, contributed to the financing for the South American transaction and is filling a void created by the increasing reluctance of banks to front money for real-estate transactions.
"Everyone seems to be in a wait-and-see mode. The biggest market we see is taking an existing hotel and repositioning it -- spending a little money and turning it into a Hilton, for example,'' Lofland says.
According to the trade publication Hotel and Motel Management, the U.S. hotel industry is adding 110,000 hotel rooms this year and has been building more rooms than it needs ever since mid-1996. And hotel occupancy was down significantly in each of the first six months of the year, well before the terrorist attacks of Sept. 11 curbed travel even further.
FINANCING HURDLE
The lack of financing remains the biggest hurdle in hotel brokering, says another broker, Leonard Smith, the vice president for marketing at Sparks Financial Group in downtown Houston. That company also has a financing branch, Sparks Capital.
"The greatest challenge we've got is convincing financial institutions and investors that there are pockets out there that are an anomaly -- places where the market remains strong,'' Smith says.
Those include downtown Houston, parts of Los Angeles and Chicago's downtown, he says.
The brokers advise caution to whatever American city becomes the lead bidder for the 2012 Olympics. Houston, San Francisco, New York and Washington, D.C., are seeking the U.S. bid.
Smith says Atlanta built too many hotel rooms before the 1996 games and the travel market there is only now catching up. "Salt Lake City will have the same problem,'' he says.
LONE WOLF
Smith and Lofland both say they have had to become more creative in recent years. Lofland, a construction manager in the 1970s, recalls how he was like a lone wolf in hotels when he started Intergroup in 1980.
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