Strategic Hotels CEO: Low Lodging Supply to Boost RevPAR Growth

Raymond “Rip” Gellein, chairman and CEO of Strategic Hotels and Resorts, Inc. (NYSE: BEE), joined REIT.com for a CEO Spotlight video interview at REITWorld 2014: NAREIT’s Annual Convention for All Things REIT at the Atlanta Marriott Marquis.

Strategic Hotels is an owner and asset manager of upper-upscale and luxury hotels and resorts. Gellein assessed the outlook for fundamentals in the sector heading into 2015.

New supply is “virtually zero,” Gellein said. ”These properties generate enormous amounts of revenue. Our total revenue per available room (RevPAR) in the third quarter this year was $435, so the future here, with little new supply, is really quite good.”

In addition, group business has made gains, he said. “Overall, we think that the high-end, group-based hotels have performed very well and have a very bright future, so we’re very comfortable,” he said.

Gellein also addressed Strategic’s balance sheet and how it positions the company for future growth.

“The balance sheet’s really the big story for Strategic over the last three years,” he said.

This year, Strategic has conducted almost $2.7 billion in transactions, he pointed out. The company has sold $400 million of hotels, spent $650 million on acquisitions and raised $400 million in equity, according to Gellein. The company has also paid off two-thirds of its preferred equity, paid off its convertible shares and reduced leverage.

“The balance sheet story is really a great accomplishment for the team, and it serves as a foundation so that we can grow,” Gellein said.

Meanwhile, with so many different types of hotel choices now available to travelers, Gellein outlined what Strategic’s clientele are expecting when they stay at one of the firm’s properties.

“At the luxury end, they are expecting an experience,” he observed. “We believe that the customer has to have a new experience over time to attract them to come back.”

Gellein said Strategic’s asset management team view their properties as mixed-use assets with multiple revenue sources such as restaurants and spa services. Strategic also hosts a number of community-oriented programs, such as ice-skating rinks in the holiday season, that draw local customers to its various properties, he added.