Hotel investment in South Florida has reached fever pitch. For some time now, it’s been one of the most sought after additions to a portfolio, as well as one of the most lucrative investments out there. However, things might be changing. There are signs that the sector has not only hit its peak, but begun the backward slide. The recent sale of the Diplomat hotel in Hollywood, Florida, might be the stop sign that potential investors need to heed.
The Scale of the Sale
In terms of price, the Diplomat’s price and accompanying expenditures were very, very impressive. The property was sold for $460 million to Thayer Lodging Group. In addition to that, the company spent another significant chunk of change on land around the hotel, as well as a golf course – to the tune of $75.5 million. Then there’s the additional investment of $100 million the company is planning to make improvements to the property and guestrooms. All told, the purchase will actually cost Thayer $635.5 million, making it one of the most expensive ever seen in South Florida.
The End of It All?
Experts are saying that despite the unprecedented scale of the sale, this might be a sign of the end. One reason for this is that the number of available hotel properties has dropped significantly through purchases and other transactions. There are very few properties out there that could match the Diplomat in cost per room anyway. That doesn’t mean that the entire hotel industry in Florida is on the brink. Just that South Florida might not be the ideal market for comparable investments or purchases. There are a number of similar properties farther north, though.
How the Diplomat Will Play Out
There’s a lot of interest in the upgrades and additional value that Thayer will add to the Diplomat with the expected $100 million. In terms of features, the Diplomat certainly wasn’t lacking in the first place, which means that the investor has their work cut out for them in terms of adding value to the property. One change that’s already been announced is the rebranding of the hotel. Currently, the Diplomat is part of the Westin family of properties. However, Thayer has announced that the Westin moniker will be dropped in favor of the new Diplomat Resort & Spa, and it will become part of Hilton’s Curio portfolio.
That move worries some experts in the area. Curio has only been around for a few years, and lacks the name recognition of Westin, or even other Hilton brands. Thayer could be “shooting themselves in the foot” with the rebranding efforts, although only time will tell which side of the argument potential guests fall on. With that being said, most travelers rely on branding to tell them what to expect from a property. A hotel with an unknown name, regardless of the power behind that name, stands to lose out to properties with better recognition.