Real Estate Alert reports that while across the country the hotel industry is suffering through its worst recorded downturn, hotel owners are looking into marketing their properties as apartment-conversion residences instead in an effort to maximize value and recover losses. Hotels are facing their lowest occupancy numbers in years and are not generating enough cashflow, and while traditionally, pitching them to multi-family developers has not gained much traction, the coronavirus pandemic has caused owners to reconsider. By June 3rd, almost 60% of open hotel rooms were vacant, according to the American Hotel and Lodging Association. Thousands more have shut down operations completely. Since February, the hotel industry has lost more than $31 billion, and is on track to lose hundreds of millions more per day. The road to recovery is expected to be a long one.
Multi-family, on the other hand, has proven to be a more secure industry and one of the first to recover, even during economic downturns. CGI’s Mark Cohen, Southeast Managing Partner, told Real Estate Alert that he is actively searching out hotel conversion opportunities in the midst of the coronavirus pandemic, and beyond. Apartment style properties, with full kitchens or kitchenettes, are most ideal. Because hotels already market private rooms and suites, and have extensive plumbing systems in place, the conversion is usually smooth and for the most part, painless. “While there are challenges with converting a hotel to apartments, I do think there will be opportunities to make higher returns from these type of deals,” Cohen said. “Although we’re still in the early stages, I think you will start seeing more sellers on the hospitality side that are in distress and need to sell.” Some hotels that are considering this method actually were facing issues before the pandemic hit, and once shutdowns were in effect, were pushed over the edge.
Read more about this interesting industry tactic here: https://www.realert.com/search.pl?ARTICLE=189767