Location: Five Crucial Points to Address When Selecting a Hotel Location
By Fred B. Roedel, III Partner & Managing Member, Roedel Companies, LLC | February 19, 2012
This is a fun topic at a time when few if any parties have actually been seeking new locations. But as the economy improves and the hospitality industry begins to see some light at the end of the tunnel, it is nice to think investors and operators are actually talking acquisition and growth again. There is the old saying that the key to successful real estate investing is 'location, location, location.' This statement has stood the test of time, but the areas we investigate within a location are what really make a difference in our investments and their ultimate success. The five areas our firm focuses on when reviewing new locations are; the basic market, the physical site, the competitive set, demand and brand availability.
One of the first areas to evaluate is the make-up of the current market. We look at all kinds of markets within our strategic targeted growth areas and ask the following basic questions:
- Is there an opportunity due to lack of supply?
- Is the current supply of hotels newer construction or older, and if older, how old are they?
- What is the makeup of the existing hotels, is there a potential opportunity with a brand or a particular segment within a brand?
- Is the market a mature marketplace with a track record of success, a developing market or a new and developing market?
- What do we think the barriers to entry for future development are?:
< high real estate prices
< difficult zoning
< architectural review standards
< historically difficult approval process
Our company took advantage of a situation like this approximately 6 years ago. We identified a location in an aging stagnant market. Our evaluation indicated that the age and condition of the existing supply provided a key opportunity. In addition there were few raw land sites. We developed a focus-serviced product that has become the number one performing hotel in the market because there were customers that wanted to stay in this particular marketplace but did not consider many of the existing hotels acceptable options.
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