NEW YORK CITY—While sounding some cautionary notes, Blackstone's Jonathan Gray, the firm's prolific head of global real estate, was largely optimistic about the hotel industry earlier this week at the NYU International Hospitality Industry Investment Conference.
“We expect continued moderate growth,” he predicted. “If you look at the United States now, we're doing ok. The first quarter was tough; the slowdown abroad led US companies to pull back. But now, housing, auto, and other sectors are doing well. We will continue to see upward pricing in this country.”
And in some parts of the world that many investors are questioning today, Gray sees opportunity. “China's economy has grown greatly in the last 20 years. Residents formerly couldn't invest outside of the country but now they can invest up to 15% of their portfolio abroad. We want to welcome foreign investment because it's deploying capital and creating jobs. The more investors and travelers there are—and the more integrated we are as an economy—the better.”
He added, “I see opportunity in Southern Europe, where there's still legacy distress. We've been active with housing in Spain. Also, the growth market has shifted to India, where the government is focused on that. Last year we leased more office space in India than in the rest of our whole portfolio.”
In hotels, Gray divulged, “We like branded properties. Building brands takes years, in terms of customer recognition. Also we like markets with less supply, such as San Francisco, Los Angeles and Oahu. Markets that are oversupplied include Miami and New York.”
Looking out on the horizon, he anticipates more merger and acquisition activity in the hotel space. “Mergers will continue because there's benefit to scale. We could see the merger of hotel companies where they're strong at the high-end but have no select service product, as well as independents moving into these brands. Long term, there will be more rooms across a smaller number of players.”
“We expect continued moderate growth,” he predicted. “If you look at the United States now, we're doing ok. The first quarter was tough; the slowdown abroad led US companies to pull back. But now, housing, auto, and other sectors are doing well. We will continue to see upward pricing in this country.”
And in some parts of the world that many investors are questioning today, Gray sees opportunity. “China's economy has grown greatly in the last 20 years. Residents formerly couldn't invest outside of the country but now they can invest up to 15% of their portfolio abroad. We want to welcome foreign investment because it's deploying capital and creating jobs. The more investors and travelers there are—and the more integrated we are as an economy—the better.”
He added, “I see opportunity in Southern Europe, where there's still legacy distress. We've been active with housing in Spain. Also, the growth market has shifted to India, where the government is focused on that. Last year we leased more office space in India than in the rest of our whole portfolio.”
In hotels, Gray divulged, “We like branded properties. Building brands takes years, in terms of customer recognition. Also we like markets with less supply, such as San Francisco, Los Angeles and Oahu. Markets that are oversupplied include Miami and
Looking out on the horizon, he anticipates more merger and acquisition activity in the hotel space. “Mergers will continue because there's benefit to scale. We could see the merger of hotel companies where they're strong at the high-end but have no select service product, as well as independents moving into these brands. Long term, there will be more rooms across a smaller number of players.”
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