Elise Capital Quarterly Journal: Q2 2022
The month of July will mark the first full year of ownership in Elise Capital's Hampton Inn Douglas property. In the first year of ownership the property has proven to uphold its level as a leader in the market. Innovative management strategies and control of the property has led to NOI margins of 32.6%, surpassing industry standard norms. From the investor view, this means more cash on cash return on investment which has averaged 15.3% through the year.
As the economy continues to change and interest rates on the rise, asset management is imperative to protect the risk of a hotel investment.
Rise of Interest Rates
At the 2022 NYU Hotel Investment Conference taking place this past June, the concerns of interest rates on the rise was a frequent topic of discussion. On June 15th, the Federal Reserve raised rates by 75 basis points with the projection to raise again in July. Higher interest rates result in an increase to overall debt payments which in turn reduce cashflows returning to owners. To prepare for this risk, owners should reevaluate loan terms to refinance at lower fixed rates.
Facing Economic Uncertainties
Hotels rely on market demand to drive occupancy and ADR. As witnessed in the mid stages of 2020, if demand is not present the hotel will fail. Our economy cycles through rises and falls at varying times. The owner mindset is not to only prepare for the best, but also the worst case scenarios. In determining deal feasibility it’s crucial to identify multiple demand generators as relying on one industry adds risk in down cycles. With consideration for economic changes, owners should evaluate their budgets to include safety reserves in the categories of working capital, insurance, taxes and debt.
Success Is Found In Preparation
In the world of hotel investing, playing the defensive to protect your investment results in significant positive impacts to your return in the long run.
Hospitably,
Kendra Plummer
Founder, Elise Capital
Curious about Elise Capital’s next investment opportunities? Attend our state of Elise Capital webinar on July 19th. Continue to keep up to date in our investment offerings by subscribing to elisecap.com/invest where we will launch a series of exclusive investment webinars over the next few weeks.
Investors Corner
Investing in hotels can often feel like an unrealistic goal. Our Investors Corner spotlights real hotel investors bringing relatability on the journey to ownership.
Dr. DeQuan M. Smith
Assistant Dean – Inclusion, Diversity, Equity and Accessibility
Morehouse School of Medicine
Former:
Assistant Professor of Hospitality Management
"I will forever be grateful for those who continuously provide opportunities for others like myself to change the face of ownership in the hotel industry.
As a former hospitality industry executive and educator, the lack of diversity in hotel ownership contributed significantly to my decision to invest in hotels coupled with my desire to create a legacy for my family. Hotel investing provided an avenue to create passive income and a pathway that aligns well with my retirement goals.
While my formal educational training is in hospitality, it was not required to invest. My involvement in professional organizations such as the National Association of Black Hotel Owners afforded me opportunities to learn more about hotel investing and cultivate relationships that ultimately led to investing in my first deal. “