NEW YORK—Loews Hotels & Resorts will continue to look for opportunities to expand through acquisitions but increasingly also through new development, said Paul Whetsell, president and CEO, during a break at the 36th annual New York University International Hospitality Industry Investment Conference.
“When I came to Loews two and a half years ago, if someone asked me about buy versus build I would say if we did 10 deals, eight or nine of them would be acquisitions,” he said. “Today, the values in many major markets have crept up to a point when, even in New York to a degree, but certainly outside of New York, it’s not that big of a (cost) differential between what you can build and what you can buy because the values of existing hotels have gone up so high.”
Loews recently opened the 1,800-room Cabana Bay Beach Resort in Orlando, Florida, as part of a four-hotel complex of properties it operates at the Universal Orlando theme park. And next year it will open a 400-room new-build property in downtown Chicago.
“The clear preference for me is if I can find the right asset in the right location is to buy, even if it is the same price (as a new build) because with an acquisition we can get into a market two or three years quicker,” he said. “However, in the near future, we will probably switch from 80% to 90% of deals being acquisitions to about 70% acquisitions.”
In the past two years, the company purchased hotels in Washington, D.C.; Boston; and Hollywood, California, and rebranded them as Loews properties.
The wish list
Either through acquisition or new development, Loews has a list of markets it would like to penetrate, including (in North America): Seattle; San Francisco; Dallas; Houston; Toronto; Vancouver, British Columbia; and Mexico City.
Whetsell said because Loews is an owner-operator, it’s unable to bid on some hotels up for sale.
“A lot of the hotels on the market now are Hyatts, Hiltons and Starwoods, and since those companies are all going asset light, they’re not giving up management of these hotels,” he said. “If we can’t get the management or franchise out, it’s off limits for us.”
Whetsell said Loews might eventually consider expansion to Europe.
“It’s a place we would like to go, but over the next several years most of our activity will be here (in North America),” he said. “Also, we don’t have feet on the ground (in Europe), and we have enough markets in North America I want to penetrate.”
He would consider a resort transaction if the property were big enough and had facilities for groups.
“We’re reluctant if it doesn’t have a group component, but there are markets where a hotel would benefit us in terms of keeping groups in a rotation of Loews properties,” he said. “We bid on two of them this year but were outbid. I will stretch a little for a (transaction) in a place like Seattle or San Francisco, but it’s harder to stretch on a resort.”
Opportunity in Minneapolis
The company’s most recent transaction was its purchase of the Graves 601 Hotel, a Wyndham Grand property, in Minneapolis from Graves Hospitality Corporation. The sale was announced in late May with the transaction scheduled to close in early July.
While not a coastal gateway market, the hotel and the Minneapolis market are attractive to the company, Whetsell said, citing the property’s age (8 years old), its good physical condition and the city’s position as the dominant destination in the upper Midwest.
“It’s a significant market with a diversified economy and multiple demand generators. It’s a good corporate market, a significant medical market and a regional meetings market,” he said. “And perhaps surprisingly, it’s a good weekend leisure market.”
The company also has been busy renovating properties in its portfolio, including a $100-million project at its flagship Loews Regency New York. The hotel closed for a year during the renovation and reopened in January.
“The Loews system has never been in a better physical condition than it is today since we’ve spent about $250 million on our hotels in the past couple of years,” Whetsell said. “They’re now in good shape, and most all of the work was done by the end of the first quarter so we were back in operating mode.”