Below Replacement Cost. Based on pricing guidance, the Hotel can be acquired below replacement cost. This offering presents an excellent opportunity to purchase a Marriott branded hotel for less than the cost of construction, giving an investor an attractive basis which will help re-position the SpringHill as the market recovers.
Underperforming Asset. Since opening in January 2015, the SpringHill has struggled to capture market share, finishing 2016 with the following statistics: 29.7% occupancy, $96.52 ADR and $28.67 RevPAR. Whereas, the competitive set finished 2016 with the following statistics: 46.8% occupancy, $106.97 ADR and $50.38 RevPAR, leading to a 57.8% penetration index and 6 of 8 rank. Looking at June 2017 STR report, the Hotel has increased the RevPAR to $39.25 compared to the competitive set at $53.42, which is showing signs of improvement at a 73.5% penetration index.
Houston Energy Corridor. Historically, the Houston Energy Corridor has been the premier market in Houston for RevPAR growth, driven primarily by corporate demand in the oil/gas industry. Looking at the “Katy Freeway West” submarket, which encompasses the Houston Energy Corridor, the upper-priced hotels had the following statistics in 2014: 73.0% occupancy, $151.78 ADR and $110.79 RevPAR. In 2016, this same tract finished with the following statistics: 61.0% occupancy, $131.53 ADR and $80.27 RevPAR, which represents a 27.5% decline in RevPAR compared to 2014. The decline is due to the tightened travel budgets from the local oil/gas companies as oil prices remained unstable. However, with oil prices showing signs of stabilization in Q2 2017, oil/gas executives are confident that the future is bright.