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2015 investment forecast: The hot markets

If you ask Josh Wyatt, Patron Capital’s investment director, for his 2015 forecast, he’ll tell you hostels and lifestyle brands are hot and city centers are filled with opportunities for expansion. However, Deric Eubanks, CIO, Ashford Hospitality, Dallas, would disagree. He contends full-service portfolios will be the thing next year. For Leslie Ng, CIO, Interstate Hotels & Resorts, Arlington, Virginia, primary markets are trending. Others say tier-two cities have more appeal. The problem for anyone trying to see the 2015 big picture is they are all right. The key investment trends for the next 12 months look more like they’ve come out of a kaleidoscope than a crystal ball.

That said, 2015 should give investors a lot of reasons to smile. Debt financing is likely to remain available at attractive rates in North America and Western Europe. There’s a healthy flow of good deals coming to market all over the world.

However, the big wins are going to be scored by dealmakers who are the best curators, not the generalists. A few deep-pocketed types can afford to play opportunistically across all segments around the world, but most real-world investors will need to narrow their focus and filter offers within a specific sector or country to reach their ROI hurdles. They also must have sharp elbows and fleet feet to get contracts signed before their hungry competitors take them out of the game.

Over the following week, HOTELS Daily News Service will excerpt a feature from the December issue of HOTELS’ Investment Outlook to report on what the experts advise to leverage the upside of 2015. Today, we provide some insights on the markets to watch.

Tracking the hot spots

Sorry, but there are virtually no markets truly “under the radar.” The mere scale of competition for good deals has investors shopping everywhere from Madrid to Milwaukee, Wisconsin — and expecting to get equally good returns on the right deal in the right markets for them. In a few cases, investors have a must-have location. Generally, though, the answer to the “what’s hot” question will be as much about the individual asset as the locale.

HOTELS’ Investment Outlook: Where are the red-hot markets for 2015?

Peter Willis, CIO, Chatham Lodging Trust, Palm Beach, Florida: Job growth and migration patterns in the United States are making the Seattle/Pacific Northwest, Bay Area/Silicon Valley, Houston/Dallas areas hot right now. Miami/Miami Beach is also quite hot because of increasing visitation, less seasonality and less price sensitivity from guests.

Trevor Ward, managing director, W Hospitality Group, Lagos: Angola, Ghana, Nigeria, Ethiopia, Tanzania, Kenya and Mozambique all have greater scale than most other African countries, with diversified — or diversifying — economies.

James Kaplan, senior vice president of development, Minor Hotel Group, Bangkok: Keeping in mind it’s coming off a low base, Sri Lanka is heating up, as is the Indian Ocean region as a whole.

Achin Khanna, managing director, HVS, New Delhi: Medium to long term in India, I would keep an eye out for Bhopal, Bhubaneswar, Vishakapatnam, Vijayawada, Patna and Bodh Gaya.

HIO: How can developers work around the high costs and limited product in gateways, especially in Europe?

Ramsey Mankarious, founder and CEO, Cedar Capital Partners, London: Think outside the city-center box. You won’t find much in Mayfair (London), but in up-and-coming neighborhoods like Shoreditch, it is more doable, even though Europe is still a tough market for developers.

HIO: What’s the biggest shift in developers’ thinking for 2015?

Leslie Ng, CIO, Interstate Hotels & Resorts, Arlington, Virginia: We are beginning to see developers taking a more aggressive posture with newer brands from the majors, such as AC by Marriott, Starwood’s Aloft and Home2 by Hilton.

Dominic Murray, director, head of EMEA Brokerage, CBRE Hotels, London: Economy brands will be hotter than ever. Motivating factors include excellent cost to value; brands in this space typically yield space more efficiently than their more traditional counterparts, which gives them a competitive advantage. They tend to be private vehicles, which can use their balance sheets and can utilize the full spectrum from acquisition of land, conversion of buildings, leasing, etc., to secure the best sites. Examples include CitizenM, Inter Ikea Group’s deal with Moxy, Tune and Motel One.

HIO: What’s the hottest product for 2015?

Robert Hecker, managing director, Pacific Asia, Horwath HTL, Singapore: Prime, quality assets remain the most desired for their capital appreciation and sustainability. Failing that, as product positioning reduces, portfolios typically have to be involved to garner adequate interest.

Willis: Where they are feasible, premium-branded select-service and upscale extended-stay will continue to generate development interest because they are the fastest to ramp up toward stabilized cash flow, and more and more travelers are choosing them over higher-priced alternatives.

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