Lodging REIT Seeing Benefits from Renovations

John Murray, president and COO of Hospitality Properties Trust (NYSE: HPT), joined REIT.com for a video interview during REITWeek 2015: NAREIT’s Investor Forum, held in New York.

Hospitality Properties Trust invests in hotels and travel centers in the United States, Puerto Rico and Canada. The company and three of its sister REITs recently announced they would acquire approximately half of their external manager, RMR LLC.

“We think it’s beneficial to shareholders because it creates a better alignment of interests,” Murray said. As a part of the transaction RMR will become publicly traded by year-end, which will increase its transparency, he noted.

Meanwhile, Murray said competition for assets is tight. About 85 percent of the company’s portfolio is in select service hotels, a segment of the market where the number of players has increased, according to Murray.

Hospitality Properties Trust has also been busy upgrading its portfolio, Murray said. Since 2010 the company has invested almost $900 million on a major renovation program for its Marriott, Intercontinental Hotels Group, Sonesta and Wyndham tenants.

Murray said the renovations have had a clear impact on results, with occupancy rates above 75 percent. Revenue per available room (RevPAR) growth in the last nine quarters has been at least 2 percent higher than the industry average, he noted.

At the same time, Hospitality Properties Trust continues to expand its travel center operations. Murray said the company is set to acquire 30 travel centers, an investment of approximately $350 million. He explained that the return on the travel center operations is about 8.5 percent, “which is typically more attractive than what we find on the hotel side.”

Murray commended the company’s travel center management team for their skill in expanding margins on fuel sales and for altering the business’ customer mix.