AXIS/GFA ATTENDS THE 2017 NORTHWEST HOTEL INVESTMENT FORUM
October 31, 2017
Earlier this month AXIS/GFA founding architect Cory Creath travelled to Seattle to attend the Northwest Hotel Investment Forum. The forum, founded in 2011 by hospitality industry consultants Sandman Savrann, is an invitation-only, semi-annual event for principals and executives of hotel owners, brands, management companies, developers, investors, and lenders. The forum features a one-day agenda focusing on up-to-the-quarter trends in hotel investment, development, and design in the Pacific Northwest market. This and other events hosted by Sandman Savrann – including their perennially anticipated Powder Summit – make regular appearances on the AXIS/GFA event calendar, but with AXIS/GFA’s merger earlier this year, and with the firm poised to continue to position itself as one of the notable hospitality architectural design firms on the West Coast, this year’s forum was of particular interest to the team.
The 2017 installment of the forum provided attendees with a number of insights unique to the Northwestern hospitality market; here are our take-aways.
Investment – Look to minor markets for untapped opportunities
As would be expected, the factors tempering hotel development across the rest of the continent are influencing development in the Northwest as well; the suffocating cost of land, increasing labor costs and the evermore-competitive market for skilled labor are increasingly challenging developers along the west coast. Although 2016 and the start of 2017 saw a continuation of the previous five years’ momentum with record transaction volumes and prices per room, a look behind the numbers reveals a notable shift from metropolitan market investment to minor market investment. With that shift from major markets to fringe markets, the profile of hospitality investor and developer has changed as well, with REITs continuing to sit on the sidelines and smaller hotel companies and individuals filling their place. Not surprisingly, with the bigger investors on the bench, the profile of investment opportunity is changing too, with transactions valued over $200 million diving precipitously as investors with less capital look to more affordable markets where projects can be developed for much less.
The key take-away? As conditions continue to compel investors to reduce risk and cost, minor markets will increasingly become attractive options for developers. Architectural, interior design, and construction firms that support hotel developers will likely see a new roster of individual investor clients seeking their services as well.
Design – Modular construction to gain prominence
The previously mentioned increasing labor costs driving developers to explore new markets is the same condition compelling developers to explore new design and construction methods to reduce costs and increase project profitability. Notable among new construction approaches is modular construction, where significant components of a hotel – usually entire guestrooms and hallways – are fully built and furnished offsite for quick and inexpensive assembly at the building site in a process appropriately called “stacking”. Marriott, a brand AXIS/GFA has notable hotel design experience with, is leading the way in modular hotel construction with projects like its Folsom Fairfield Inn & Suites property, a proof-of-concept project overseen by NHIF panelist Don Cape, Director of Development for Tharaldson Hospitality. The modular property was delivered six months quicker than a typical Marriott new-build project, and was realized with two percent construction waste compared to the industry average of six percent. With select service properties popular with developers at the moment, and with modular design lending well to select service brands, hotel architects, interior designers, and builders can anticipate seeing more modular projects in the days to come.