Hotel Sellers Meet Investors With Vision

As the lodging industry struggles, adaptive reuse is emerging as an option for distressed hospitality properties.

U.S. hotel occupancy has struggled to recover from its April nadir of 22 percent. Occupancy reached 48.2 percent in the week ending August 29—down almost 28 percent from the same period of 2019, according to data from STR. Demand for rooms actually declined over the previous week as summer comes to an end and leisure travel tapers off.


Development firm Repvblik says that its hotel-to-housing conversion project in Branson, Mo., generates robust demand and a waiting list of about 30 to 40 people for each new building that comes online. Image courtesy of Repvblik

“The hotel industry remains on the brink of collapse,” the American Hotel & Lodging Association concluded in a recent report, even as travel has ticked up.

The ongoing crisis has forced many hotel owners to sell their properties at a loss. A September report by Real Capital Analytics found that distressed sales accounted for 7.8 percent of all hotel sales in the U.S. during the second quarter, up from 2 percent or less in 2019 and the highest percentage of distressed activity among commercial real estate sectors.

One solution to the industry’s mounting pain is to sell properties to investors who can transform the property into a more successful use.

One such investor is Richard Rubin, founder and CEO of development firm Repvblik, which specializes in turning distressed hospitality properties into affordable or workforce housing. The company is wrapping up the conversion of a mothballed 423-key Days Inn property in Branson, Mo., into a 341-unit affordable, workforce-targeted housing project called Plato’s Cave, and has fully leased up the available buildings.

“The demand has been amazing,” Rubin said of the pioneering project, which offers efficiency and one-bedroom apartments at monthly rents ranging from $495 to $725. “It’s really been a great proof of concept for us.”

Rubin currently has around 10 further hotel-to-housing deals in the works around the country, including a Ramada Inn conversion underway in Topeka, Kan.

Sector Insights rotates among office/medical office, industrial, retail, multifamily, self storage and hotel/hospitality.

Read the October 2020 issue of CPE.

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