Hotel REIT Fundamentals Driving Earnings Growth, Says Hersha Executive

Neil Shah, president and COO of Hersha Hospitality Trust (NYSE: HT), joined REIT.com for a video interview at REITWorld 2015: NAREIT’s Annual Convention for All Things REIT at the Wynn Las Vegas.

Shah said fundamentals within the hotel REIT’s core markets are especially solid.

“We have very strong demand fundamentals and very little supply. We feel that it’s one of the best times to be a hotel owner,” he said.

Shah acknowledged that although there have been easier times to issue equity and secure funding, the strength of fundamentals is a driving force behind growth in earnings before interest, taxes, depreciation and amortization (EBITDA).

Hersha remains focused on New York, Boston, Philadelphia, Washington, Miami and select markets on the West Coast, according to Shah.

“Beyond choosing those markets for their fundamental attributes, we’ve also made it a point to develop clusters within those markets, where we have an advantage in operating and sourcing new transactions,” he explained.

In 2015, Hersha achieved double-digit growth from Los Angeles, Southern California, Northern California, Miami and Boston, Shah said. New York and Washington have seen slower growth because of new supply coming online and the continued recovery in the nation’s capital following the government shutdown. However, Shah said he has high hopes for the Washington market, which has the “potential to surprise to the upside” in coming years.

Shah added that despite news about more moderate growth in the Northeast, the company still sees the opportunity to outperform there.

“Across the country, we feel very good about the hotel space,” Shah said.

Shah also discussed the challenges involved in acquiring assets on par with its recent $57 million purchase of the St. Gregory Hotel in Washington.

“It is challenging to find great, high-quality assets in these kinds of major gateway markets, but it’s not as difficult as one might imagine,” Shah said. He noted that one reason for this is that the hotel market is large and has a highly fragmented ownership structure.

Shah said that when Hersha bought the St. Gregory, it was a well-kept hotel, but not optimized from a managerial standpoint. “Our strategy has been to change the market mix and attract higher-paying corporate guests,” he commented.