As part of the Americas Lodging Investment Summit’s Patron sponsorship program, ALIS asked Accor SVP Mark Purcell eight timely questions as we prepare for the 20th annual event July 26-28, 2021, at the JW Marriott/Ritz-Carlton Los Angeles L.A. LIVE. Following are his responses.
What one word best describes the current hotel development landscape, and why do you use that word?
Opportunity. To be fair, we’ve been through a brutal 13 months that have resulted in significant challenges, both personally and professionally, for so many people within our industry, as well as outside of it, and in no way do I want to diminish that experience. However, as we come through the other side, as is the case with any significant market disruption, there are definitely opportunities.
How do you see new-construction vs. conversion activity taking shape during the next 12 months?
There will certainly be more opportunities with conversions in the near term, but we foresee new construction coming along quickly thereafter. We have been having many conversations with owners of unbranded hotels looking to get affiliated with a powerful reservation system and strong loyalty program to gain the benefits of scale and reach. Accor offers owners who are independent minded the opportunity to affiliate with a system where the brands are more unique and distinctive than perhaps some of the other large hospitality groups. We believe that offers us an advantage.
How does Accor view the opportunity for expansion in North & Central America during the next 12 months?
We think there is tremendous opportunity for us to expand our platform both through franchising, which we’ve put a renewed focus into, as well as management agreements over the next 12 months and beyond. We are a leader in both luxury and lifestyle in North & Central America and its where most of our focus is. We have great brands that are underrepresented in this region that can be positioned at nearly any price point. Our lifestyle brands range from luxury lifestyle with SLS down to Tribe at the midscale level and at every space in between. Our more traditional offerings are predominantly focused on the premium and luxury sector with brands like Fairmont, Raffles (with the first Raffles Hotel & Residences in North America set to open in Boston next year) and Sofitel. And with soft brands such as the MGallery Hotel Collection and Morgans Originals (including the recently announced Legacy Miami project), we are positioned well for independents and niche properties.
What general challenges and opportunities will emerge in the Americas during the next 12 months from a development standpoint?
Financing of new construction projects will remain a challenge for a period of time as lenders will be selective about coming back into the market. Quality projects with the right product type, location and sponsor will be key to successfully securing financing. From the perspective of a brand and management company, a challenge will be that there will be fewer projects happening so it will be highly competitive, requiring creativity and flexibility as well as great relationships to bring projects to fruition.
What do you see in terms of transactions and investments during the next 12 months?
So much capital has been raised during the pandemic that is looking for distressed opportunities. To a large degree, and for a variety of reasons, those opportunities have not come to fruition to the level that most people expected. Therefore, there is a still a lot of money that needs to be put to work. Investors need to decide if they are going to wait longer to see if more distressed assets come along or pivot to alternative strategies. There will probably be a mix of both, but ultimately there will be a lot of capital seeking investments in the next 12 months, which should bode well for the transaction market. Among commercial real-estate sectors, hospitality will be preferred investment alternative with higher expected returns. I expect we’ll see a lot of variety in how assets are priced when they trade based on the product, the market as well as the condition of the seller.
What do you think will be the mindset of lenders in general for the next 18 months? Will lenders’ purse strings loosen during that time?
I expect lenders will be anxious to get back in the game as travel begins to pick up, but they will have a different approach going forward as they evaluate the effects of the pandemic on their book. Whether this is a short-term or permanent impact remains to be seen. We’ll likely see more conservative loan to value ratios as well as changes to insurance requirements, guarantees, and collateral. Loosening of the purse strings will start slowly with the best sponsors and best assets getting the early action. Over time, as the outlook clears, we’ll see some lenders get back into the financing of new construction projects, but again, it will start with best sponsors and best assets.
What should hotel owners be doing now to prepare for the recovery, including the expected rush of U.S. leisure travelers hitting the road this summer?
Hotels have already put in place a lot of measures to ensure that guests feel comfortable and safe. This will continue to be a priority since the virus is still a real threat and there is so much uncertainty around it even as people get vaccinated. As business picks up making sure that hotels are equipped to implement those safety measures will be important. When you are running 25% occupancy it is a lot easier to handle than when you are at 80% occupancy. We’ve been challenged at our busy hotels getting appropriate staffing in place. Owners will need to work with operators to make sure the right balance is struck for bringing staffing back in anticipation of business picking up. It’s very difficult to forecast, given the race between vaccines and new variants of the virus and the short booking windows that are in place.
What’s the one takeaway people should know about Mark Purcell?
I guess it’s that I’m grateful. As you know I recently stepped into the role of leading development at Accor in the North & Central America Region. A lot of people reached out to congratulate me including the person who hired me as a night auditor at the Albany (N.Y.) Marriott right after I got out of college. All of those people reaching out caused me to reflect on, unbelievably, my 30+ years in the industry. I’ve had the opportunity to work with and for so many great people over the years; colleagues, mentors and clients that have turned into rich relationships. Also, to be a small part of a team that brings a new hotel project to life; from an empty space to a vibrant destination where people experience life is deeply satisfying. It really is an amazing industry full of opportunity. I am grateful that I’ve had the opportunity to experience all of that.