With the hospitality industry evolving rapidly, choosing the right hospitality investment company is crucial for maximizing returns. This article provides insights into the key factors to consider when selecting the best hospitality investment companies. By analyzing elements like assets under management, portfolio diversification, past performance and investment strategies, investors can identify the top performers in hospitality real estate investment trusts (REITs), private equity firms and investment managers. With over $300 billion in lodging assets, companies like Blackstone, Colony Capital and Host Hotels & Resorts have built impressive track records across hotel, resort and senior living investments. However, niche players like Service Properties Trust and Apple Hospitality REIT offer focused strategies in net-leases and select-service hotels. Evaluating hospitality investment companies based on target markets, deal structures and value creation capabilities is key to finding the optimal match.
Focus on sizable assets under management across varied hospitality segments
The top hospitality investment companies manage billions in assets across diverse real estate classes. Blackstone, the world’s largest alternative investment firm, has over $230 billion in assets under management, including major stakes in hospitality. Its hospitality portfolio includes interests in over 350 hotels globally across luxury, lifestyle, extended stay and limited service categories. With its Hilton and multi-family platforms, Blackstone deploys significant capital into hospitality real estate. Other leading asset managers like Colony Capital manage hospitality investments valued at $4.9 billion. Expanding beyond hotels, top companies increasingly target growth segments like senior living. For example, private equity firm Lone Star Funds acquired a $550 million stake in Dallas-based Capital Senior Living in 2019. With demand for senior housing rising, investors are tapping into the huge potential of senior living communities and services.
Diversification across geography and hospitality segments reduces risks
While some companies specialize in specific hospitality markets, portfolios diversified across geographies and segments can reduce risks. Host Hotels & Resorts, one of the largest lodging REITs, has interests in over 70 luxury and premium hotels across North America, Latin America, Europe, the Middle East and Asia Pacific. Such varied geographic exposure helps mitigate risks and capitalize on high-growth regions. Within a region, owning different hospitality formats – like luxury resorts, business hotels, limited service – creates multiple revenue streams. Co-investing in joint ventures also enables companies to participate in larger deals and diversify risks. For example, private equity firm Rockpoint Group and hotel operator Highgate formed a $1 billion-plus JV to acquire hotels across the U.S. Diversification maximizes reward potential for hospitality investment firms.
Analyze historical performance and resilience during downturns
Evaluating the historical performance and downturn resilience of hospitality investment companies provides useful insights. Among REITs, Host Hotels & Resorts has delivered an exceptional long-term total return of over 13% to shareholders. During 2020’s pandemic disruption, Host’s flexible balance sheet helped limit RevPAR declines to -56.7%, outpacing the industry average. Reviewing 10-year performance histories and NAV figures sheds light on investment acumen across cycles. On the private equity side, Blackstone’s hotel platform has achieved returns of 18% historically. The firm’s extensive renovation and repositioning expertise helps unlock value. For instance, Blackstone’s overhaul of Las Vegas’ Cosmopolitan hotel led to a $5.65 billion sale and windfall gains. While past returns don’t guarantee future success, historical performance indicates an investment firm’s capabilities and operating savvy during downturns.
Evaluate investment strategy and value creation abilities
Each hospitality investment company employs differentiated strategies, so assessing approach alignment is vital. Niche REITs often specialize in areas like net leases or select segments. Service Properties Trust primarily invests in necessity-driven hotels with long-term net leases to minimize volatility. Apple Hospitality REIT focuses exclusively on rooms-focused hotels like Marriott and Hilton. Investment managers like Ares Management emphasize distress and special situations. Ares’ real estate arm targets underperforming hotels for turnaround. Additionally, tactical partnerships between investors and operators enable value-optimization. For instance, private equity firm CGI Merchant Group teams with brands like Hyatt and Hilton to enhance returns through brand management. Evaluating strategies and partnerships provides insights into an investment firm’s philosophy and value-creation abilities.
Identifying top hospitality investment companies requires analyzing key factors like assets under management, portfolio diversification, historical performance and investment strategies. Leaders like Blackstone, Host Hotels & Resorts and Colony Capital have built formidable track records across hotel, resort and senior living investments. But evaluating approach alignment and value creation abilities is vital in determining the optimal firm.