Unlocking Luxury: ALIS Panel Delves into Today’s Most Pressing Lifestyle Questions

At the recent Americas Lodging Investment Summit (ALIS) in Los Angeles, David Duncan, CEO of First Hospitality, shared valuable insights on the choice between building or buying properties in the luxury and lifestyle hotel market. The consensus? Buying is generally the smarter move now, given the current risks tied to building from the ground up.

Panelist Carolina Bernal from JLL highlighted that replacement costs are significantly high—averaging around 45%. This makes purchasing an existing property more appealing, offering greater potential returns.

The discussion shifted to the necessity of a brand for a newly acquired asset. Duncan argued that while a strong brand can be beneficial, success isn’t solely dependent on it. “It really depends on the property’s location and features,” he explained. Independent hotels can thrive, often generating higher profits for owners.

He cited the Hutton Hotel in Nashville as a prime example. This hotel has succeeded as an independent venue for years, and Duncan noted that they are now enhancing it with thoughtful investments. “If you find a property that needs some care, you don’t have to overspend on luxurious materials to create a memorable experience,” he said.

Duncan emphasized the importance of the market when assessing whether a brand is necessary. In Nashville, the demand for travel is strong enough that the hotel’s success doesn’t hinge on a big brand name. However, in different areas, having a brand might be essential to attract guests.

Choosing a brand can be complex. Duncan described it as a “puzzle match,” where factors like location, brand flexibility, and target customer demographics all play a role. They placed great value on thorough research when considering options for the Hutton.

Regarding the build versus buy debate, Duncan highlighted the current market’s fantastic buying opportunities. “Now, you can find assets available at a discount compared to replacement costs. It’s crucial to buy carefully and add value through strategic improvements without overcapitalizing,” he added.

He also noted the Hutton’s proximity to Nashville’s vibrant music scene as a unique selling point, further enhancing the guest experience. Creating a cohesive impression from the moment guests hear about the hotel to their arrival is essential.

Duncan concluded with advice for potential investors: focus on the story you’re telling through your property and ensure you’re buying at a reasonable price. “There are some great opportunities out there right now,” he said. “Just make sure your investment delivers an authentic experience.”