GlobeSt.com: Why is the hotel sector so important to Auction.com? What are you doing within it that's different?

Falor: Auction.com's transparent platform is uniquely suited for transacting assets in the hospitality space—particularly at $15 million and under, which is the sweet spot for hospitality since 65% to 70% of all hotels fall into that category. We understand how harnessing the platform can be a great win for sellers, brokers and buyers. We get terrific feedback from bidders participating in the platform, whether they're in retail, multifamily or another property sector, who are trying to balance their portfolio from a yield perspective. The computer doesn't recognize the advantage of one bidder over another, and this creates a more level playing field—something that we continuously hear from buyers is an advantage.

GlobeSt.com: Why should investors turn to your platform to buy hotels?

Falor: If you look at hotels, it's an operating business that happens to be on real estate. But it's a perishable business as well—once the clock strikes midnight, you don't get to go back and rent that room; either it's rented or not. With our platform, we have the ability to furnish due diligence to people up front and provide them with up-to-date documentation such as environmental and financial reports that help them to effectively access the true value of a property. At the end of the day, all qualified buyers have an opportunity to bid on an asset in a transparent, open environment and potentially win. Our platform truly connects buyers and sellers, across the US and worldwide. A traditional brokerage simply does not have the resources to reach that wide of a marketplace. Now, let me stress that our platform is no substitute for having broker representation—in fact, our process works best when a broker works in conjunction with our platform. It's really an enhancement to the process.

Our team members are dedicated to the hospitality market. These are professionals who consult with owners and brokers to bring potential opportunities to the platform that we think are a good fit. And, we're exceptional at doing just that. To date, $1.4 billion of hotel properties have been transacted on the Auction.com platform.

GlobeSt.com: What are the fundamentals attracting non-traditional hotel investors to this category?

Falor: There are a lot of crossover investors who typically invest in other property sectors and then come to hotels. Part of it is the yield. In multifamily, you might be looking at a 5-cap or less, but in hotels you may see an 8- or 8.5-cap, so you've just picked up 350 basis points on the yield. Many investors are using hotel assets to balance their portfolio yields. People are starting to really gravitate toward owing hotel properties because of the predictability over the yield. At the end of the day, it's very challenging to get the returns investors are looking for when buying multifamily at a sub-5-cap.

But also, if you look at hotels from a dynamic standpoint, there's a lot of predictability on the expense side, too. You can do a lot to grow the revenue side, but on the expense side you're operating at far lower labor costs than other commercial sectors such as restaurants. A McDonald's owner, for example, might look at hotels and say, “Hey, with 18 employees I can run a property more efficiently compared to my restaurant, where I need to employ as many as 35 full- and part-time employees.” It makes sense for them.

GlobeSt.com: What else should our readers know about this sector?

Falor: Hotel buyers come in all shapes and sizes. They may be public companies, private investors or institutional funds, and they may be large hotel conglomerates, smaller regional companies, entrepreneurs or first-time owners who own commercial real estate in other segments of the market. There's such a wide array of buyers. There is also great interest in US hotels from international investors, particularly from emerging economies in China and Europe, India, Brazil and other South American countries. Asian Americans in particular also own a huge number of hotel assets worldwide. These buyers and sellers like to use our platform because it's so efficient, so transparent and basically casts the widest net in terms of potential buyers for each market opportunity. We as a company offer a huge value proposition.