Daniel Lesser: Hotel Investment, Loan Maturities, and Too Many Brands

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Four decades in this business have taught Dan Lesser to be suspicious of the word everyone keeps using, uncertainty.
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From the Cuban missile crisis to COVID, he has watched the industry get written off and come back bigger every time.
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This is the distinguished podcast from the Boston University School of Hospitality Administration on the road at the NYU International Hospitality Investment Forum in New York City, with guest host Kashikwardharajan, director of a real estate program.
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Dan is co-founder, president, and CEO of LW Hospitality Advisors, and one of the most widely quoted voices in lodging investment.
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In this conversation, he moves from the top line to the bottom line, explains why today's distress looks more like a wall of maturities than a fire sale, makes his case that the industry simply has too many brands, and tells us why he stays so bullish on San Francisco and New York.
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Let's dive in.
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So we are at the NYU IHIF conference, and I'm here with Daniel Lesser, co-founder, president, and CEO of LW Hospitality Advisors.
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Daniel, thank you for making the time to join us.
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Thank you for inviting me.
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It's great to be here and great to see you.
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So, Daniel, let's dive into it.
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We have a busy conference, so we'll get you out of here quickly.
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So let me start by asking you uh to just give us a general overview of what you're seeing in the hospitality industry today from a top line and a bottom line perspective.
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Top line is is is doing fairly well.
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Uh we all are aware that uh um RevPPAR is is growing, but very, very modestly.
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And for the most part, that's attributable to the average rate side of the equation.
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So generally speaking, gross revenues are pretty steady-etty and doing well.
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Where a lot of owners and operators are having challenges in certain assets and certain markets, is bringing it down to the bottom line.
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And we've all heard a lot about labor, the cost of labor, uh, in union markets, uh uh work rules, the lack of labor is putting tremendous pressure on uh those costs within the lodging industry.
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And then you bake in rising energy costs, rising property tax costs, uh rising insurance premiums.
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The industry is being challenged from a bottom line perspective in terms of growing the bottom line.
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Uh we've seen lots of assets and submarkets where revenues are increasing slower than expenses.
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Well, that's not a durable business model.
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How long can you can you do that?
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And so uh there are definitely some challenges out there.
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There's no question about it.
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But challenges create opportunities, and there is an enormous amount of capital out there, both on the debt and the equity side, looking to uh deploy to solve a lot of these challenges that existing owners and operators are facing.
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With maturities coming due, the can is no longer being kicked down the road.
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And so we're seeing we're seeing lots of transactions that are coming to market that are, I wouldn't call them distressed, but they're definitely forced.
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And there's a lot of money out there, as I said a minute ago.
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And so the notion of stealing property in terms of pricing, it's really very difficult to find because anything that has a good story to it in terms of opportunity uh is going to ultimately get bit up.
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So you may have a distressed financial structure of a hotel, it's operating fine, but the the capital stack needs to be redone.
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And the the the time has come where lenders are no longer, you know, playing nicely in the sandbox like they did during COVID, which they should have done back then.
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And so you have this wall of maturities that is in fact coming.
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I know we've been hearing this for a while, but you just look at the data, there's a lot of it coming.
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Uh, and there's a lot of capital on the other side to uh take advantage of these opportunities.
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We're seeing all sorts of trades that are way below replacement cost.
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I think you know I'm a big fan of San Francisco.
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I have been for quite some time in terms of where I believe opportunity lies.
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And Blackstone recently bought the four Caesars there for a fraction of replacement cost.
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That's just a you know one example.
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Um Gencom has made a huge bet in New York City, having purchased three hotels over the past 18 months.
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The uh Intercontinental on 8th Avenue, the Ritz-Carlton Times uh Central Park South, and the uh Thompson Hotel on 57th.
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So you have these smart, sophisticated investors, both on again, on the debt and the equity side, uh seeing that there's there's upside uh at a certain basis.
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And so we're seeing repricing going on.
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There's no question about it.
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Yeah, that's great.
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And I think I thoroughly enjoy your quarterly surveys that you send out.
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Thank you.
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And I was looking at your Q1 2026 survey, and we showed that 110 hotels sold, all over$10 million, 100 and a 64% jump in dollar volume, a 30% increase in price per room compared to the same quarter in 25.
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So are we at that stage where kind of kick the can down the road is done and you're starting to see transactions start to happen and sellers saying, okay, let's sell.
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You know, it's interesting.
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I uh well, first of all, thank you for those compliments about the quarterly survey.
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Um, we've heard a lot of noise over the past uh 18 months, if you will, about the transaction market being slow.
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And as I track the data on a quarterly basis, if you look back over the past five or six years, and I have a chart that illustrates this.
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Um if you don't consider 2020 and 2021, if you look at the metrics of assets that are trading now uh in terms of total dollar volume, it's right where in the range of where it was pre-COVID.
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What has changed, however, is deal size.
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So the volume's there, but it's it's uh it's it tends to be smaller transactions than pre-COVID.
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Now, with that being said, there's still on some very substantial large assets that have been trading uh and refinancing.
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The diplomat in in uh in in Florida, in Hollywood.
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Um uh uh the what's the property on uh the uh Park Hyde, Beaver Creek just sold 900,000 a room.
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So you know you you're definitely seeing some fairly uh substantial assets um that are trading way below replacement cost.
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Yeah, and I think that's an encouraging sign.
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Hopefully, other investors are seeing these big institutional players, these big bets, and will hopefully follow through on other transaction activity.
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I I I think when we look back on this year, we're gonna see a fairly robust market this year as well, no different than we saw last year.
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Okay.
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Uh so Daniel, you've been known for saying that our lodging sector is crowded with undifferentiated brands.
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Previously, common wisdom was that if you were at a branded hotel, you got a 10 to 15% premium in terms of valuation.
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Are you seeing that compress with all of these brands in the market?
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And how do you how do you view that sentiment now?
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Great question.
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Uh it candidly boils down to really a specific asset and a specific location.
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The the hotel business always has been a street corner neighborhood business.
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We're sitting in Manhattan right now, right, in the heart of Times Square.
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The Times Square hotel market is very different than Lower Manhattan in the financial district.
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Those are two very different markets, and yet they're both in New York.
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So you really have to look on a market by market, actually a submarket basis and individual um individual basis.
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And you know, so with so many brands today.
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Uh there are way too many brands out there.
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I've been saying this for years, and uh, I guess Hilton today just formally announced the uh undergraduate.
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Undergraduate, right?
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They have graduate undergraduate.
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Um I don't really understand uh I mean, I know why they're doing it, and I think we all know why they're doing it, right?
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They're they're grasping for fees, right?
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They're publicly held, they're they're under pressure to produce earnings.
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Um and so I've actually heard a um uh a not to be named franchise salesperson in the hotel space articulate that uh in answer to a question relative to how do you decide when when to come up with a new brand, and the answer was very straightforward.
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When we run out of white space when we can't plant the pin, we come up with a new brand.
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That's not economically and financially the way the markets work.
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And it's a little bit backwards.
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In any event, there are too many brands out there, there's no question about it.
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And I I listen, in terms of premium, there are still lots of lenders out there that just psychologically can't deal with the notion of an independent hotel, irrespective of whether that is the highest and best use of an asset.
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They they they feel more comfortable with a brand attached to it.
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And I'm not sure that's going away all that soon.
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Yeah.
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But it seems like independent hotels are here to stay, they've gotten stronger over time, and uh some beautiful ones out there.
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So when I started in the in this business uh more than 40 years ago, 4-0, the notion of an independent hotel was that that was a dying concept.
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And for a while there it was.
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However, in the past 15 years or so, plus or minus, um, independent hotels are are a phenomenon and they they're they're not going away.
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And on many situations, the highest and best use of an asset is not to pay for brand identity, but rather create your own identity.
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And we've seen lots of independent hotels that you know you they open one up and all of a sudden it's a new brand, right?
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And then it's successful, and they take the that name and take it around the country.
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So uh independent hotels are not going away by any means.
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Okay.
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So now we spoke about the tough operating environment, some of the uncertainty out there.
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This is not the first cycle where you've seen uncertainty before.
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Any learnings from all the other cycles that you've seen that you want to share with the audience today?
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Well, interesting.
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You mentioned the word uncertainty.
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Uh I scratch my head when I hear that word, and we've been hearing it often the over the past year and a half.
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And I scratch my head because fundamentally I believe life is uncertain.
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You cross the street, you don't know whether you're going to make it to the other side, right?
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So um life is uncertain.
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I think you can sort of guarantee that in addition to death and taxes.
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So I'm not sure why it's being talked about so much.
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I mean, we've you look back, one of my earliest memories in life is the Cuban Missile Crisis, right?
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And and if you look at all the worldwide events that happened then, the war in Iraq, the stock market crash in 1987, 9-11, uh um, COVID, right?
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All these calamities where when they occurred, it seemed like the world was coming to an end.
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And we seem to come through it every single time, and ultimately bigger and better than whatever the calamity was.
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So um I'm pretty bullish, uh, you know, barring some nuclear event in the world, which God forbid were to happen.
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The hotel business and the travel industry are good sectors to be in.
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As a matter of fact, in all my years, I don't recall ever there being a time where hotels were perceived as more desirable assets than office buildings.
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Right?
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When you think about that, uh COVID obviously decimated the office sector, and it's still somewhat challenged, particularly for anything that is not a class A building.
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Um and so hotels, you know, given that they have daily leasing and constant repricing, uh, that's considered very favorable, obviously in a in a rising market, in a declining market, it can really hurt you hard.
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But that's risk and there's reward associated with if you buy right and you buy at the right basis.
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And the last thing I'll throw in is that how to be looked at as long-term investments.
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So if you underwrite for a three to five year hold, and by the way, there are lots of people who made lots of money doing that, underwriting three to five-year hold, it could be a dicey proposition.
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Those calamities that I just mentioned, right?
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Think about COVID.
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Somebody who closed on a hotel February 1st of 2020 was not feeling too good on April 1st of 2020.
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Same thing with 9-11, right?
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On September 1st, it was very different than September 12th.
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That's that's the risk associated with the hotel business with daily leasing again and constant repricing.
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Uh, so if you underwrite for a 10-year hold, doesn't mean you're necessarily going to hold on for 10 years, because if a capital event opportunity does bubble up in year three, four, five, where you can bake in some gains, you'll take advantage of that.
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However, if you are unfortunately caught up in some calamity, you have the runway to hold on to it for 10 years total and recover any potential damage to uh any potential calamity.
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So the one thing I would suggest is underwrite for a long term.
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Doesn't mean you necessarily have to hold on for a long term.
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Okay.
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And, you know, they say that one of the ways to handle the uncertainty is to have great data, which you now have with Lark and uh which you co-founded with Ryan Melliker, which is a fantastic platform.
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Thank you.
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Having LARC in-house now, what has that taught you about underwriting?
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Are you doing your underwriting differently than you were before LARC?
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You know, we underwrite uh as a reflection of what the market does.
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That's what our assigned our mandate is doing valuations and market studies and feasibility work.
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Uh LARC Lodging Analytics Research and Consulting was brought to the market uh June of 2020, great timing, right after COVID.
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Um it's it it it's a phenomenal offering that nobody else has.
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Um there's some confusion.
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There has been confusion in the past about well, is this like STR or is this like uh Calibri Labs or CBRE Horizons, which I don't think exists anymore, but in any event, it's very different.
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And and um it's a one-of-a-kind offering that has been very well embraced by the lodging industry and it's become part of market intelligence that investors are now relying upon.
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Uh, we're seeing lenders now that are saying, where's the LORK report when they review an evaluation or an appraisal?
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So, in answer to your question about changing our underwriting, yes, we are now considering Lark's data as part of our reflection of the market because the market looks at it.
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Um listen, there's so much data and information out there, and the key is harvesting it and figuring out how to use it and manipulate it.
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And LARC is a very interesting offering in that uh Ryan Mellicher, who runs the platform, when you look back at his predictions, you do a look back, his batting average is amazingly high in terms of being within a reasonable range.
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Whereas other prognosticators in the space have much lower batting batting averages.
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Um we also have a GIS offering on top of the uh the LARC uh data.
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And so it's very cutting edge and um it's an amazing platform, and I'm grateful to be a part of it.
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All right, my last question for you.
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Daniel, if you had a hundred million dollars today and you could deploy that anywhere in the country, any segment, what would you do?
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I I like uh I I really like San Francisco.
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I've said that for many, many years, and I I see it now coming to fruition.
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San Francisco is coming back.
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I do recall when I started vo vocalizing this a couple of years back, getting a fair amount of pushback.
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And uh you just look at what Blackstone's doing.
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Uh John Gray is a huge fan of San Francisco.
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If you've ever seen his uh his LinkedIn posts where he runs and he talks about a whole variety of things, he's when he's in San Francisco, he talks about how bullish he is in San Francisco.
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They recently acquired the four seasons there for a fraction of replacement costs.
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And so to me, that only validates uh what I've been saying for quite some time, that that's a great place to deploy money.
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I also like New York on a long-term basis.
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Uh, you look at Gencom, Kareem Alibi, he's a pretty smart guy.
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He's made a big bet on New York over the past 18 months.
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He's acquired three major hotels in New York.
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The most recently the Ritz-Carlton Central Park South, the Thompson on 57th Street, and the Intercontinental on 8th Avenue.
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These are substantial assets.
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And I think that speaks volumes about um long-term prospects for for a city like New York.
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And the last thing I'll say is it's it's interesting when you think about New York.
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Six years ago, when COVID happened, New York was written off, done, finished, never coming back, doom loop, if you remember that term, right?
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You walk outside this hotel, the Marriott Marquee here in Times Square, you can't you can't even stay on the sidewalk.
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There's so many people out there.
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You can't see the sidewalk.
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Right.
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So I I like downtown urban cores because people like to live in downtown urban cores.
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They may not like going physically into an office, but they like living in downtown, and I I don't see that going away anytime soon.
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And tourism to markets like uh uh San Francisco and and New York on a long-term basis, phenomenal.
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Yes, we're experiencing a little bit of a uh decline and hopefully a rebound given all the geopolitical noise that's going on in the world and Canadians not coming here, but that's not going to continue for too much longer.
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So I'm genuinely pretty bullish.
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Okay.
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That's great.
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Daniel, thank you so much for joining us.
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It was a pleasure having you at our real estate symposium back in Boston in March, in April.
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Uh, and you were part of the Uncensored panel, and it's a pleasure to spend some time with you again.
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I wish you a great rest of the conference today.
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Thank you so much.
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Thank you again for having me.
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Absolutely.
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Great to see you.
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That brings this episode to a close.
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Thanks for joining us on the road at the NYU International Hospitality Investment Forum, and our thanks to our guests for sharing their time and insight.
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The distinguished podcast is produced by the Boston University School of Hospitality Administration.
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