Phoenix American Hospitality has purchased 13 hotels in multiple states this year and plans to invest another $100 million to $150 million in additional hotel purchases by the end of 2017.
The Dallas-based hotel fund manager has ramped up quickly, going from no hotels a year ago to making its first purchase in August 2016. Now, the company has 14 properties.
W.L. “Perch” Nelson, president of Phoenix American Hospitality, said he focuses on hotels that need a financial turnaround.
“By using some of our management expertise, we can make the hotels a little more profitable,” Nelson said.
The sector that Phoenix American Hospitality is targeting, the upscale, limited service hotels, is the hottest in the industry right now, said Jan Feitag, senior vice president for STR, a hotel consulting company.
These hotels are in the “sweet spot” between the economy hotels and the luxury hotels, Feitag said. “Consumers love them, banks love them, the parent company of the brands loves them, developers love them,” he said. “Everybody wants a piece.”
When Phoenix American Hospitality buys a hotel, the change is seamless and invisible to the public, Nelson said. For employees, Phoenix analyzes workflow and looks at how fast housekeepers can turn a room.
Nelson founded Phoenix in 2007 originally so he could be a consultant for people looking to buy their own hotels.
“Now it’s for our own account and our own investments,” Nelson said.
The company is buying hotels in Kansas, Georgia, South Carolina, North Carolina, Virginia, Louisiana and Dallas but they’re staying away from tourist traps.
“We don’t focus on a particular market that we want to be in,” Nelson said. “We don’t like markets that have a high concentration of tourism. We’d never go to Orlando or Vegas. If the market crashes, it’ll be the tourists that won’t travel. Businesses will always travel.”
With additional acquisitions planned for the end of the year, Nelson said he projects company assets will be worth about $300 million. Phoenix American Hospitality has grown to 700 employees. The rapid success has Nelson already eying an exit in a few years through an IPO or selling it to a real estate investment trust.
“Our overall strategy is to acquire a billion dollars worth of assets so we can evaluate an exit strategy,” Nelson said.