Want To Buy A Historic Hotel? The Sale Of The Property Is Just The Beginning Of The Money You'll Have To Shell Out

Though overall investment volume for new properties is down almost 70%, according to CoStar Group, hotel and hospitality investors are not letting a lack of bank funding and high-interest rates stall their enthusiasm to buy already existing properties. 

A recent report from JLL showed record sales this year for existing high-quality assets located in desirable and growing markets. But what's being done with the properties after purchase has become a talking point for many investors and hospitality sector onlookers — especially the price tag for renovations. 

High-end properties sold recently include the Four Points by Sheraton in San Rafael, California, which Equinox Hospitality picked up this month for $38 million. It was Equinox's fifth purchase in 2023. 

Last week, District Hospitality Partners announced the acquisition of the 225-room Westin Annapolis, famous for its proximity to the U.S. Naval Academy, the Maryland Legislature and the beautiful Chesapeake Bay. 

But buying these large properties appears to be easier than deciding how to make them viable for the next few decades. At the June Boutique Hotel Investment Conference, sustainability was the key topic. 

"Sustainability has been misrepresented over the years and this has created confusion because everyone wants to think of it as one solution that fits all," said Benedetta Cassinelli, co-founder of sustainability consultancy Considerate Group. "Sustainability is very much linked to your brand, your ethos, the identity of your company, and it means something very different for each company."

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But some investors, though considering environmental, social and governance (ESG) sustainability, are more concerned with spending millions to make a classic hotel inviting for the clientele while restoring its glory. Two cases in point:

• The Omni Homestead Resort in Hot Springs, Virginia, is undergoing a $120 million renovation. The restoration includes facade work, a new event facility, a housing complex, updated guest rooms, refreshed public spaces, infrastructure improvements and contemporary amenities. 
• The majestic Blackstone Group-owned Hotel del Coronado in San Diego is in the middle of a $400 million expansion and renovation of the iconic 134-year-old property.  

Those two properties, though thousands of miles apart have a common thread. They've hired the same design firm, WATG and its interiors studio Wimberly Interiors.

Wimberly Creative Director Liana Hawes Young has been working with the owners of both properties and told Benzinga that she's been fortunate to work with investors and owners who appreciate the impact these renovations have on their communities. 

"Luckily, my clients understand the value of history. The Omni Homestead is the oldest hotel of its type in America, and you can't recreate this stuff," she said. "The people who come to these properties have an appreciation for being a part of history." 

Hawes Young says she's been frustrated by some investors who have taken to modernizing classic properties. 

"I've seen renovations where they stripped out a lot of the history and wanted to make it a term I despise — ‘transitional,' which means nothing," she said. "At the Del, we've specifically decided that though we don't want the renovations to make it look like your grandmother’s home, it can still be done in a fresh way and feel fun and fresh. People have an emotional connection to these properties." 

Renovations at the Hotel del Coronado started in 2019, and the current work won't be concluded until 2025. Renovations at the Homestead began in 2018 and will be completed next year.  

Asked how Blackstone and Omni Hotels expect to make money at their two properties after multiple years and millions of dollars expended Hawes Young said, "The Homestead renovations were enormous and a huge investment for Omni, but they also own so many other properties, including golf courses and other historic locations. The Del is and will be a very, very valuable asset when this is over, and Blackstone will be able to sell it to someone who won't have to make any renovations for a very long time.  Blackstone doesn't purchase properties to keep them, so if you have a lot of money, look at the Del in 2025."

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Photo provided by Wimberly Interiors