The Current Impact of Brand PIP Requirements on Hotel Sales

Eric Guerrero | November 22, 2019

By Eric Guerrero The most consistent issue HVS Brokerage & Advisory has encountered during transactions is whether a group is budgeting sufficient capital for prospective asset acquisitions that require PIP renovations. An incorrect estimate means buyer groups must increase their capitalizations or request a price reduction on a dollar-for-dollar basis relative to their cost increases. This ultimately changes many metrics late in acquisition processes and lowers IRRs because any extra capital is drawn entirely from equity and not a blend of equity and debt. Recent observations are detailed below. The lesson is that accurate PIP estimat...