It’s been a busy fall for Bhavnesh Vivek. In September and October alone, the vice president of hotel acquisitions for The Radco Cos. finalized the purchase of seven hotels in Florida and Georgia as the real estate investment firm turns an opportunistic eye toward an industry that like many saw major disruptions through the COVID-19 pandemic.
Radco, an Atlanta-based firm specializing in the acquisition and redevelopment of multifamily properties, hired Vivek in February 2021 to start its hotel platform, which has since grown to 10 properties mainly under Hilton and Marriott flags. Its most recent purchase was of a new-build Aloft hotel in suburban Atlanta. Terms of the deal were not disclosed, but the company said the acquisition was “at a basis below today’s replacement cost.”
Vivek, who came to Radco from hotel ownership group Auro and handled strategic market planning for InterContinental Hotels Group, said “a $15 million to $75 million deal size is the sweet spot” for the company. Its first acquisition under the new hotel division was a 174-room, full-service DoubleTree by Hilton in Roswell, Georgia, purchased in August 2021 for $13.75 million from a real estate fund divesting of hospitality assets. Among the more recent deals was the purchase from Blackstone of a Courtyard by Marriott in downtown St. Petersburg, Florida, for $29.1 million.
“The main impetus was related to COVID and some of the disruption we saw. Basically, travel stopped,” said Vivek of what prompted the platform’s formation. Hotel franchisees were “propped up for about 18 to 24 months with government programs and franchisor relief.”
Bhavnesh Vivek is vice president of hotel acquisitions for The Radco Cos.
“That has all basically come to a stop in the last six months. So they’re seeing debt come due” and groups are “having to make tough decisions in evaluating their portfolios,” he continued. Radco is in a position to deploy capital, he said, with a focus on select-service and compact full-service assets in “upper midscale through upscale brands like Aloft and Courtyard.”
The impact of the pandemic on the travel industry was nine times that of 9/11, according to the American Hotel & Lodging Association. As part of its Franchise Times Top 500 coverage in October 2021, Franchise Times reported overall sales in the hotel segment plummeted 47.9 percent in 2020, to $50.9 billion. The segment rebounded in in 2021, up 49.1 percent, to $73.4 billion total, but the majority of brands still have some work to do to catch up to pre-pandemic figures.
DoubleTree by Hilton, for example, grew global system sales an estimated 60.5 percent in 2021, to $3.1 billion, but that’s still below its 2019 sales of $4.8 billion. Courtyard, meanwhile, had estimated sales of $4.9 billion in 2021, up 37.1 percent but below the $6.6 billion it did in 2019.
Radco, which works with companies such as LBA Hospitality and Hospitality Ventures Management Group to manage its hotel properties, is focused primarily on the Southeast, said Vivek, where population growth and the recovery of travel are positively impacting the market. Competition for deals is “relatively thin” in the mid-market space, he noted.
“We feel it’s a pretty good time for us to keep being aggressive,” said Vivek.