The COVID-19 pandemic upended the hotel real estate market, compelling Berkadia’s Hotels & Hospitality team to reset their expectations, rethink their approach to client service and work together with clients, colleagues and partners to help rebuild the industry going forward. Amidst this upheaval, Berkadia’s Hotels team has deepened client relationships, gotten creative in providing solutions and seen positive opportunities emerge for owners.
We sat down with Andy Coleman, Senior Managing Director and Head of the Berkadia Hotels & Hospitality group to reflect on an unprecedented year for the industry and consider what the recovery looks like in the year ahead.
If you could sum up the past year for hotels and hospitality in one word, what would it be?
Reset. Heading into 2020, the hotels market, and our team, were coming off a year of record growth. Berkadia Hotels & Hospitality started the year (January through March) over 150 percent ahead of same time in 2019. The events of 2020 brought a stark reset, impacting all of us, and will continue to transform our industry for the next decade, maybe even longer.
What have you learned as a result of the pandemic? What lessons will you take forward?
Timely, actionable insights are a priority for anyone in the lodging space right now and since the beginning of the pandemic, clients have looked to us to understand what was happening in real time, whether by daily or weekly topline data, talking with competitors about their on-the-books pickups, or getting in front of local elected officials. Our clients leaned on us in ways we’ve never seen before for the data, industry relationships and local affiliations to aid them in their everchanging response to the pandemic and we’ve continued to innovate and adapt our resources to provide the best data, analysis and insight.
What do you see on the horizon for your industry in 2021?
We’re hopeful that 2021 will see a slow, steady hotel market recovery. The first half of 2021 is likely to be similar to 2020: sellers will be reluctant to go to market, groups that raised equity will be more and more eager to put their money to work and, for the most part, the boots on the ground operators will survive on stimulus and PPP. We’re optimistic that the second half of 2021 will see the chips start to fall into place as vaccines get more widely distributed and the new normal of travel patterns begin to emerge.
What trends do you expect to impact your industry in 2021?
From an operations perspective: All eyes are on business and leisure travel trends – when do they start to materialize (business travel) and when do they start to normalize (leisure travel).
Looking at capital markets: as more and more lenders re-enter the lodging space, rates will come down and leverage will go up. We’re already starting to see these trends emerge, but the trickle we’re currently seeing will likely turn into a fuller stream once travel patterns start to normalize.
On the transaction side, along with the types of transactions that have become more commonplace in 2020 (note sale/financings, rescue capital placement, foreclosure sales, etc.), we expect to see a continued appetite for multifamily conversions, like the Georgetown Suites. Since the beginning of the COVID-19 pandemic, hotel to multifamily conversions have been of great interest to all investor types and an attractive opportunity for sellers to achieve a sale value closer to pre-COVID levels. We think this trend will be particularly interesting in helping address the affordable housing crisis.
What are you excited about in 2021?
Everyone loves a comeback story, and the hotel markets are primed! Our industry—and our people—are dedicated, creative and above all, resilient, and we are optimistic about what lies ahead.