Why Aren’t More Hotel Deals Getting Done?

Glenn: [00:00:00] Hello, one and all from the lodging conference. Your friendly hospitality. Glen. Over here. I want to thank our friends over at Actabl, Actabl they give you the power to profit. Make sure you check out actabl.com. But while you’re checking them out, I want to introduce you here to Ryan Bodine, SVP with NewGen Advisory. And you know, we’re here at The Lodging Conference, man. So I want to know about the transaction market because I don’t know anything. So I know I know enough to be dangerous. So I want to bring in a pro over here to share what’s going on. The way I see it is their deals seem to be loosening up more happening. There’s a lot of conversions going on. What are you seeing out there? Am I right? Am I.

Ryan: [00:00:34] Wrong? Well, look, there’s there’s no shortage of buyers, right? Right. Absolutely no shortage of buyers, no shortage of product out there in the market. But right now, there’s still a pretty big disconnect.

Glenn: [00:00:45] Still, I’m getting real tired of this. All right.

Ryan: [00:00:46] So I know.

Glenn: [00:00:47] All right, I have to put a pin in that because I didn’t I did a video in August where I asked the person, hey, what’s with all this money on the sidelines? He’s been sitting there my whole career. And he started going into getting the buyers and, you know, the buyers and the sellers kind of more aligned. He thought that was happening because transactions were up. So where’s that philosophy wrong and where are you using it in your experience?

Ryan: [00:01:08] Well, I think right now business in general is struggling. Hotel business is struggling. And so when you have a lot of uncertainty in a transaction market, Glen, you got to turn that phone off, man. We’re having this damn interview. His phone’s going off.

Speaker 3: [00:01:21] Going going going. I tried to be slick about it. I was trying.

Ryan: [00:01:23] I called you out.

Speaker 3: [00:01:24] Go on. Yeah.

Ryan: [00:01:25] So. So look, when when top line business is being affected because of all this uncertainty, right? The Iran war, the, you know, Ice invading and taking your staff away. Right. It’s it’s impacting the Mexicans from coming in. You know, the the threat of Canada becoming the 51st right state. Right. All of those uncertainty is impacting, impacting the top line. And it’s also impacting a lot of the transaction uncertainty, right. No one knows what’s going to happen tomorrow. So if guys aren’t if they don’t have an awesome deal that they can take advantage of, and they’d rather just sit on the sidelines until that deal.

Glenn: [00:01:59] So what I hear you saying, the definition of an awesome deal has shifted from, let’s say, 2 or 3 years ago, you think?

Ryan: [00:02:06] Yeah. I mean, look, 2 or 3 years ago, three, four years ago. Yeah. Right. Money was cheap, right? The hotel business was still struggling. There was still a lot of uncertainty there. So a lot of the opportunity was more on the conversion side. Right. You know, there was a severe housing shortage, which there still is. But debt was cheaper, so it was easier to make those conversions work. Now the debt’s more expensive. Guys are looking and saying, listen, if I’ve got $5 million to put a down payment for a hotel, but if I’m not receiving, you know, a decent return, then I might as well just hold on the cash, put it in a money market and get 5 or 6%.

Speaker 3: [00:02:41] That’s true. Yeah. And even.

Glenn: [00:02:43] Yeah. And just put it into some of the companies that are have pretend profits and you’ll do really good.

Speaker 3: [00:02:49] Right until the AI bubble. Right. So it’s, it’s got to get out right before that pops over there. Yeah.

Glenn: [00:02:54] I think maybe on the next show I’m going to have a seer and they’ll be able to tell us what the the issue is if that bubble is actually going to pop. But how are you like thinking long term into the next year? I mean, it looks like interest rates are going to stay stable in October, but continue to rise. And to me, it seems like you need to take a different psychological approach because I’m old enough to remember when this was still good interest rates right before the Great Recession happened, right? But one of the things I’ve said many times before is we’ve trained a generation of investors to think differently about that. So maybe it’s time we need to, to step back and reevaluate and hit like a reset.

Speaker 3: [00:03:30] Button with.

Glenn: [00:03:30] This and kind of think about where the money is, you know, how do you see.

Speaker 3: [00:03:33] That?

Ryan: [00:03:34] So you said reset. And I was going, that’s always been like my key word. So last year, I feel like everyone that I’ve been speaking to at this conference, right? They all had kind of a reset in mind, right? Like, let’s get back to the basics, right? It’s not 2122 anymore. But let’s, let’s get back to where it all started, right? Let’s not get ahead of ourselves. Let’s make sure the deal pencils from an operator standpoint, right? Guys don’t want to get in the head ahead of themselves by, you know, investing in an unknown brand and, you know, taking a massive mortgage out. They’re focusing more on let’s focus on the, the basics, right? How do we improve the customer experience? If we improve the customer experience, it’s going to impact our top line, right? So this reset comes from not only an investor side, but also an operator side and also a broker side. Yeah. Right. So like my mindset going into this is, look, we talked about this right before the this podcast started, right? Like we’re so fortunate to work in this industry. We really are. So, you know, I’m changing my mindset from expectation to appreciation. I love it. I just appreciate being out here and like, if this is work, just like shooting the shit with you. I know. Come on.

Glenn: [00:04:42] Hey, not so bad. Not not so bad. So the message I’m taking away from this is kind of we got to reset the way we think about things. There’s always opportunity out there. And I’ll tell you what, hoteliers are always successful with that right mindset. During Covid, I saw a lot of people make really bold decisions that paid off. I’m seeing the same thing now. One guy in an event a couple of years ago, he said yeah, other people aren’t building. I’m building now because never going to be cheaper, so I might as well do it today.

Ryan: [00:05:08] That’s right.

Glenn: [00:05:09] You know, and I like that kind of I like that kind of mindset because if you don’t go and grab it, it ain’t going to come and get you.

Ryan: [00:05:14] I totally.

Glenn: [00:05:15] Agree. You know.

Ryan: [00:05:15] I totally agree.

Glenn: [00:05:16] All right. Let’s see if you guys agree, like share, subscribe, you know, comment down there. Maybe on the next one I’ll reveal who called me. Stay tuned for that one. I’m Glenn, he’s Ryan. See you later.