Luxury, Group Business Boosting Strategic Hotels

Rip Gellein, chairman and CEO of Strategic Hotels & Resorts, Inc. (NYSE: BEE), joined REIT.com for a CEO Spotlight video interview during REITWeek 2015: NAREIT’s Investor Forum, held in New York.

In May, the company closed on the acquisition of the Four Seasons Austin hotel for $197 million. The hotel is located in the midst of the city’s central business district. Gellein commented on the qualities that attract Strategic Hotels to the Austin market.

“Austin is a very high growth market, probably the highest urban growth market in the country, so the Four Seasons is in a ground zero location,” he said. Gellein pointed to a number of factors that are driving demand in Austin, including the state government, the university, and the health care, biotech, and high-tech industries.

Gellein commented that fundamentals in the luxury lodging market are fairly solid in most markets. The company’s first quarter revenue per available room (RevPAR) was above 12 percent, and nine out of the company’s 17 assets had RevPAR above 15 percent.

Gellein also underlined the benefits generated by supply limitations in the luxury segment, particularly in the California, Jackson Hole, Wyo. and Scottsdale, Ariz. markets where Strategic is active.

At the same time, group spending is looking positive, according to Gellein. “Overall, luxury is very strong,” he said.

Turning to the competitive New York market, which has been inundated with new supply, Gellein said the company’s Essex House property “has held up quite well.” First quarter RevPAR across New York’s hotel sector as a whole fell 4 percent, while Essex House’s RevPAR was down about 2 percent, according to Gellein. He expressed optimism that the property would withstand the current challenges in New York.

“It’s one of the best markets in the world,” Gellein said.