Feb. 13–When the 718-room Radisson Resort near Celebration sold a year ago, the hotel was long overdue for a face-lift. Hotels typically get an overhaul every seven years or so, and the Radisson hadn’t seen one in about 15.
Guest rooms at the 26-year-old hotel needed to be remodeled, with new carpet, beds and tubs. Corridors needed to be overhauled. Even the elevators needed updating. About $10 million later, the Radisson’s new owner, Waramaug Hospitality, says it has a property that’s in top shape.
“It doesn’t take too long for a hotel to start looking shabby,” said Jay Litt, executive vice president at Waramaug. “It was capital-starved.”
The Radisson is just one of the hotels getting major upgrades as money pours into Central Florida’s lodging market. Investors have bought up recession-weary properties — some built 20 to 40 years ago — and are improving hotels they say have good locations and are structurally sound.
The renovations mean more appealing options for tourists, and they help hotels justify increasing their rates. But they’re also a sign that investors have confidence in Central Florida.
“If you don’t think the market’s going to improve, you don’t want to dump in the money,” said Scott Brush, a Miami hospitality consultant.
A total of 45 hotels changed hands in the Orlando area last year, up from 42 in 2012, according to an analysis by hotel brokers HREC Investment Advisors. The biggest of those, the Peabody Orlando, had recently undergone a $440 million renovation and expansion, and it sold for $717 million to Hyatt Hotels.
The hotels that changed hands in the next five largest individual sales are all being renovated: the Embassy Suites at Lake Buena Vista, the Sheraton Orlando North in Maitland, the Radisson Resort in Celebration, the Holiday Inn Orlando at the University of Central Florida and the Orlando Vista Hotel near Walt Disney World. In some cases, buyers are spending more than half what they paid for the hotels on renovations that will make them more competitive.
There are others, too: The Villas of Grand Cypress sold in April 2012, and its new owners completed a $15 million renovation. The former Econolodge on International Drive fell into foreclosure after the 2007-09 recession. A Brazilian company scooped it up at a bargain price in May 2012 and remade the aging hotel, rebranding it as the Avanti Resort.
And city officials said this week that developers plan to spend $17 million renovating the Sheraton Orlando Downtown on Livingston Street, turning the aging hotel into a Renaissance by Marriott. The hotel debuted more than 25 years ago as one of the early high-end hotels in downtown Orlando but suffered the loss of two nearby sources of business: the Amway Arena and Expo Centre.
Today’s travelers want amenities such as a children’s play area at the pool, a coffee shop and seating in the lobby where they can plug in a laptop. All those things and more are in the works at the 334-room Embassy Suites at Lake Buena Vista, which is getting a $13 million renovation.
Ten years ago, the hotel was a top performer in its market. But now the dated hotel is an underperforming Embassy Suites when it comes to average rates, said Vineet Nayyar, whose company, GF Management, bought the property in December. Nayyar wants to see the hotel, which is offering rooms for as low as $126 in early March, raise its rates and rise to the top once again.
“There’s several Embassy Suites in that area,” Nayyar said. “We have to be different.”
Such renovations are on the rise nationally — especially in markets where occupancy and average prices are improving, such as Central Florida’s.
It’s part of a cycle that started during the recession, when some hotel brands cut struggling hotel owners some slack on upgrades that they require of franchisees who fly their brand flags, Brush said. Now, new buyers find themselves playing catch-up with renovations and repairs that were postponed.
“The brands themselves sort of cut everybody a little break during the recession, and now they’re coming down a little harder,” Brush said. “It wasn’t just that they looked the other way. They talked to the owners and said, ‘We realize times are tough, so we won’t require you to do this right now, but it will be coming up.'”
But with maintenance deferred, some owners find their buildings in such need of repair that the cost of improvements soars into the millions. Some owners have to downgrade to a less-prestigious brand — or find a buyer with money to invest.
Litt said both the Radisson Resort and the Sheraton Orlando North — which his company also bought — were at risk of losing their brands.
“If someone hadn’t stepped in and spent the money to renovate those hotels, they certainly wouldn’t be the brands they are today,” he said.
Paul Sexton, a broker with HREC Investment Advisors, said that since 2011, buyers have been snagging distressed properties that they could invest in — the equivalent of a hotel fixer-upper.
“It’s a classic thing: Buy low, sell high. Everybody bought low. Now the question is, ‘When are they going to try and sell?'”
Sexton said he expects to see a decline in local hotel sales this year as buyers adjust their expectations after years of bargain-basement deals. The cycle has moved on, and the next wave of hotel sales will be higher-quality assets, more like the Peabody than the Comfort Suites in need of repair.
“All the distressed stuff is 97 percent gone,” Sexton said. “We’re into a whole different mind-set of buyer expectations and what type of returns they expect to get.”
skclarke@tribune.com or 407-420-5664
