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As Hilton, Marriott Reach Colossus Scale, US Accommodations Sector Seen Ripe for More Consolidation

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Fitch Ratings Views Hyatt in Potential ‘Kingmaker’ Position as Other Competitors Face Growing Size Benefit of Top 2 Rivals

Grand Hyatt, Washington, DC
Grand Hyatt, Washington, DC The growing size and rates power of the 2 mega U.S. hotel brand names is modifying the competitive landscape of the hospitality market and will likely lead to more consolidation, according to recent analysis by Fitch Rankings.

Marriott and Hilton stand head-and-shoulders above their peers in regards to system size and average everyday space rates (ADR). They also appear to be taking advancement share far from smaller brand name operators. The scale-related competitive benefit usually translates into such things as lower acquiring and space circulation expenses, bigger client commitment benefits programs, and more clout in drawing in property owners and franchisees.

To compete, smaller competitors, such as Accor, InterContinental and Wyndham, will need to include more rooms across the cost spectrum to stay competitive, Fitch asserts.

Nevertheless, smaller sized accommodations operators run the risk of taking on too much balance sheet risk to grow their rooms systems, which could damage credit quality, specifically smaller operators focused on the luxury and upscale sectors that Marriott and Hilton dominate, the rankings company notes, which compiled a chart of prospective targets for more market debt consolidation.

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While Hyatt would appear to be a logical acquisition target for operators such as Accor, Intercontinental and Wyndham offered its above-average ADR, Fitch stated Hyatt’s dual class structure complicates any potential sale without the approval of the Pritzker family, Hyatt’s controlling investor.

This month, Marriott International (NYSE: MAR) reported that its systemwide North American ADR increased 1.3% to $161.01 for the second quarter compared to a year earlier. The business included approximately 16,000 spaces during the second quarter, consisting of almost 2,300 rooms transformed from competitor brand names.

Hilton Worldwide Holdings (NYSE: HLT) added 13,400 net rooms in the second quarter, representing around 30% development from the same period in 2016. Its U.S. ADR increased 1.1% to $149.27 over the same quarter a year ago.

Hyatt Hotels Corp. (NYSE: H) reported including far less 3,366 spaces and its systemwide ADR increased simply 0.2%.

Hotel franchisees and owners are revealing a clear choice to aligning their hotels with the largest brands that use the largest consumer commitment reward systems. Marriott-branded rooms consisted of 28.1% of the U.S. hotel development pipeline since July 31, inning accordance with STR Global. This is well above the business’s 14.9% share of existing U.S. rooms supply.

Comparable procedures for Hilton, the industry’s second-largest player, were 23.4% and 12.1%, respectively.

Hyatt-branded hotels, on the other hand, consisted of 2.7% of overall spaces in the U.S. hotel pipeline, which approximately matches its share of the existing stock.

Fitch Scores anticipates U.S. lodging industry RevPAR development to decelerate in second-half 2017, but stay decently favorable (in the low single digits) through 2018.

Need from leisure tourists is anticipated to outpace group and corporate hotel business for the same duration, with organisation travel projected to stay lackluster through the balance of 2017 and 2018, Fitch said.

Nevertheless, Fitch included, total brand-new hotel supply will remain at or above need for the balance of this upcycle. For the most part, these brand-new spaces are focused in the restricted service sector.

The number of spaces under building is reasonably below its prior cycle peak. However, the pipeline is 27% above its previous peak after including rooms in final planning, which have a high completion possibility. The impact of the elevated supply varies by market, Fitch added, with New York, Nashville, Seattle, Dallas and Miami being of particular concern.

MCR Sells 18 Marriott and Hilton Hotels for $407.4 Million

Courtyard by Marriott Wall at Monmouth Shores Corporate Park, Wall Township, NJ
Yard by Marriott Wall at Monmouth Shores Corporate Park, Wall Town, NJ MCR finished the sale of 18 Marriott and Hilton possessions to American Hotel Income Residence REIT LP (TSX: HOT.UN) (TSX: HOT.DB.U) (OTCQX: AHOTF)for$407.4 million ($186,283/ room).

The sale incorporated 2,187 spaces. The assets offered are in Maryland, New Jersey, New york city, Connecticut and Pennsylvania.

The Eastern Coast portfolio includes 10 Marriott branded hotels amounting to 1,206 guestrooms (5 House Inns, 2 SpringHill Suites, one Courtyard, one Fairfield Inn and Suites and one TownePlace Suites) and 8 Hilton branded hotels totaling 981 guestrooms (4 Homewood Suites, 2 Hampton Inns and two Hilton Garden Inns).

The average age of the hotels is 10 years and each hotel has actually either been recently built or renovated.

The typical capitalization rate of the portfolio personality was 7.9% on a routing 12 months net operating income basis, or approximately $186,000 per space.

“The sale of this portfolio is a reflection of MCR’s investment thesis: to buy superior branded select service and extended stay hotels, enhance operations, and offer opportunistically,” said Tyler Morse, CEO and handling partner of New York-based MCR.

Rob O’Neill, CEO of Vancouver, BC-based American Hotel Income Properties, said, “During the first half of 2017, we have been disciplined in our financial investment strategy to acquire premium branded, select-service hotels with supported in-place income, which are younger and well-maintained and where acquisition costs are listed below replacement cost.

AHIP has actually now acquired 23 hotels in the first 6 months of 2017 for approximately $589 million. Other markets it has actually finished purchases in are: Ohio, Texas, and Arizona.

JW Marriott gets fresh appearance; Michelin chef brings Riviera-inspired cuisine to the Delano

A new location of a popular chicken wings joint debuts on the Strip today as a health care clinic opens in Henderson.

A Summerlin hotel goes through a series of renovations, and new stores are turning up at an outlet shopping center.

On the other hand, a prize-winning chef serves up Riviera-inspired food.

Food shown at Buffalo Wild Wings

Buffalo Wild Wings

Sports bar and dining establishment Buffalo Wild Wings opens its first Strip area today.

The 7,200-square-foot area in the Miracle Mile Shops at Planet Hollywood is open 24 hours daily.

Spectators can capture a variety of games on the area’s 63 high-definition Televisions, and the dining spot also includes a retail section.

The Minneapolis-based company has more than 1,125 locations worldwide.

Health care Partners Medical Group

HealthCare Partners Nevada has actually revealed two brand-new medical care practices in partnership with insurance service provider Humana.

The clinics were “specifically designed with Humana’s Medicare Advantage clients in mind,” according to a press release.

The 6,000-square-foot Sun Ridge Heights clinic opened today in Henderson at 745 S. Environment-friendly Valley Parkway, Suite 160, near West Horizon Ridge Parkway.

On Oct. 12, the 10,000-square-foot Durango Hills center opened at 6210 N. Durango Drive, Structure 11, near West Centennial Parkway.

Both centers are open 8 a.m. to 5 p.m. Monday through Friday.

The JW Marriott recently completed renovation of its 469-room property.

JW Marriott Las Vegas

A transformation of the JW Marriott’s rooms and gaming areas has been finished, while remodellings continue at the home’s convention center.

Deal with the lobby, spaces and hotel passages was completed last month at the hotel and casino, located at 221 N. Rampart Blvd., near Summerlin Parkway.

Convention center restorations should be full in January.

Home improvements at the 469-room property also consisted of a revitalizing of the VIP player lounge, the opening of a 300-seat bingo room and updated gambling establishment floor carpeting.

The 3,000-square-foot A|X Armani Exchange clothing store debuted at the Las Vegas South Premium Outlets on Oct. 2, 2015.

Las Vegas South Premium Outlets

Two brand-new companies made their method into the Las Vegas South Premium Outlets this month.

Citizen, a 1,000-square-foot watch shop, opened Oct. 1, and 3,000-square-foot clothing shop|X Armani Exchange debuted a day later on at the outlets, situated at 7400 Las Vegas Blvd. South, near East Warm Springs Road.

Both stores are open 9 a.m. to 9 p.m. Monday through Saturday and 9 a.m. to 8 p.m. Sunday.

Rivea, located on the 64th floor of Delano Las Vegas, opened Oct. 1, 2015.

Rivea and Skyfall Lounge

Rivea and Skyfall Lounge by Michelin-decorated chef Alain Ducasse opened Oct. 1 on the 64th floor of the Delano.

Rivea, the dining establishment, provides food motivated by French and Italian food as well as a “special list of choose Riviera wines,” according to a news release.

Night life experience Skyfall Lounge offers 180-degree views and an outdoor patio area.

Rivea is open 6 to 10 p.m. Sunday through Thursday and 6 to 10:30 p.m. Friday and Saturday. Skyfall Lounge is open 5 p.m. to midnight Sunday through Thursday and 5 p.m. to 1 a.m. Friday and Saturday.