Broker: It's good time for hotels
By Steve Huettel, Times Staff Writer
Published May 13, 2007
Name some of the Tampa Bay area's best-known hotels and chances are good Lou Plasencia had a hand in buying, selling or repositioning them. But his Tampa-based company does only a fraction of its business in Florida. With 11 offices nationwide, the Plasencia Group last year brokered hotel deals worth $2-billion. That gives him a sweeping view of an industry feasting on soaring rates and awash in money for new properties. In an interview with the Times, Plasencia, 50, explains where the business is headed and what it means for the local area.
Any frequent traveler knows, the price of a hotel stay has risen steadily in the last few years. Is this a good time to own a hotel?
It's a good time to be an owner. It costs you less today to service debt on a hotel than any time in recent memory. Rates for rooms are going up. There has been for the last 24 months very little new supply, especially in the full-service sector. I can raise rates as much as I want and not worry about the guy across the street coming and stealing business away from me.
What's stopped investors from building more hotels if business is so good?
The cost of construction. When the four hurricanes went through Florida three years ago, the cost of construction went through the roof. Virtually every bit of cement and every bit of steel is going to China. India's going through a boom that's mind-boggling.
Isn't there a boom in hotel construction and projects in the pipeline? Why now?
This is the fourth economic cycle I've been through and this is the first time (hotel) operating fundamentals and investment fundamentals have been aligned. Operations are on the upswing and the amount of money coming into the lodging sector (is rising). There's a lot of new supply coming into markets now, mostly in the select-service arena, - Hampton Inns, Hilton Garden Inn, Holiday Inn Express.
Where's most of the growth centered?
Las Vegas without a doubt ... massive behemoths with 3, 000 rooms at a pop. Orlando. Disney is adding roughly 3, 000 rooms on their own. Phoenix. And the last market where we're seeing inventory kick in is Washington, D.C., downtown ... as well as the Dulles Airport area.
Will Tampa Bay be next?
Over the course of the next 24 to 26 months, you're going to see a huge influx of new product coming online, all the way from West Shore to Ybor City and downtown (Tampa) in between. There is a lot of pent-up demand
The Ybor hotels would be primarily select-service or limited-service. All the downtown hotels would be primarily full-service, with a possibility of doing one or two large convention hotels. In West Shore, we're looking at a combination of full-service and limited-service.
What about Pinellas County?
There will be growth potential for hotels. Not in the immediate future - I mean two years - but beyond that. The price of land, particularly the price of land on the beaches, has moved up so high because of residential sales that it's hard to build a hotel. But eventually, hotel development will come back strong.
On leisure side, there's tremendous opportunity for growth. There is a huge void of resort product, in the Florida market. There's such huge need for good high-end beach-front resort product, it's not funny.
Why are limited-service hotels without food and beverage service so popular with developers?
Two things. Construction materials. A lot of them are wood. You'll have the first couple floors of concrete, but above that, it's stick-built. The other reason is it's easier to finance them. Most of those ... projects are being financed by local or regional banks ... as opposed to the larger money-center banks.
Steve Huettel can be reached at email@example.com or (813) 226-3384.