With the hospitality industry recovering strongly after the pandemic, many investors are looking to capitalize on opportunities in this sector. However, choosing the right hospitality investment company requires careful evaluation of several factors. This article will provide an overview of key considerations when selecting a hospitality investment firm to partner with, including investment strategy and focus, deal track record, value-add capabilities, market knowledge and relationships, and investor alignment. Proper due diligence and understanding of a firm’s expertise can lead to a mutually beneficial long-term partnership and attractive risk-adjusted returns in the thriving hospitality space.
Assess the investment strategy and sector/asset focus of the hospitality investment firm
A hospitality investment company may specialize in a certain sector like hotels, resorts, restaurants, senior living facilities, etc. or pursue varied strategies ranging from core to opportunistic plays. Evaluate if the firm’s investment thesis aligns with your targeted asset class, risk appetite, and return expectations. For instance, core players like Blackstone focus on stable, income-generating assets while nimble opportunistic firms like Cerberus Capital seek higher returns through repositionings or distressed plays.
Analyze deal track record and existing portfolio of hospitality investments
Examine the firm’s historical investments and realized returns across hospitality sectors, geographies, and economic cycles. A long proven track record indicates investment acumen and ability to create value. Also assess the existing portfolio to gauge performance and expertise. Market-leading firms like Highgate maintain a global portfolio of luxury hotels, resorts, stadiums and mixed-use assets currently valued at over $15 billion.
Evaluate the value-add capabilities provided to enhance hospitality assets
Beyond capital infusion, top firms provide hands-on support through value engineering, rebranding, design refresh, procurement optimization, and implementing impactful technologies. For instance, leading owner-operator HEI Hotels & Resorts leverages its expertise to improve profit margins by over $100 million annually across its 85+ hospitality assets while maintaining high guest satisfaction.
Determine the firm’s hospitality market knowledge and relationships
Choose an experienced partner with intimate local knowledge and an expansive network of operating partners, brokers, franchisors and lending relationships. This enhances their ability to source exclusive off-market deal flow, underwrite strategically, and drive operational improvements post-acquisition. Benchmark firms like Aimbridge Hospitality and Highgate deploy their market insights and partnerships to acquire over $2 billion in hospitality real estate annually.
Ensure alignment between the firm’s incentives and investor goals
The firm’s investment goals, fee structure, co-investment stake, and investor communications approach should be aligned with your targeted returns and risk tolerance. Top-tier firms put client interests first and maintain transparent investor relations through frequent reporting and capital calls/distributions. Blackstone’s industry-leading Granite Fund embodies this alignment, delivering a ~20% net IRR to LPs over 25+ years across 60 hospitality investments.
In summary, partnering with the right hospitality investment firm requires assessing their strategy, track record, value-add capabilities, market expertise, and investor alignment. This thoughtful selection process allows for a successful long-term partnership to capitalize on the hospitality sector’s strong growth recovery.