Waterton, Waterford Team Up For Hotel Investment, Preparing For Possible Recession

Waterton, an investor active in the multifamily and hotel sectors, just formed a new venture with Waterford Hotel Group, and company officials say the move is a great way to prepare for a possible recession.

The Chicago-based Waterton typically buys value-add hotels, but with prices reaching new heights, company officials say it has only been buying selectively. It plans to continue doing so until a correction hits the sector, and that could be very soon.   

“We’re long in the tooth in the current RevPAR cycle, and it’s hard to find deals that make sense today,” Waterton CEO, Chairman and co-founder David Schwartz said.

Hotels’ revenue per available room is strongly correlated with overall economic performance, and if the U.S. economy slips, RevPAR and values should finally start to sink, Schwartz said. That would set the stage for Waterton to begin buying hotels at a more robust pace, and its new relationship with Waterford will play a key role.

On its own, Schwartz expects Waterton could most likely buy three or four hotels per year during a recession, but with Waterford, that number will likely increase.  

“This will put us in a very good position when we get to the other side of the cycle,” he said.  

The industry had a 102-month stretch of consecutive monthly year-over-year RevPAR increases, a streak that ended in September, which some experts blame on the impact of hurricanes in Texas and Florida.

Waterford now manages eight hotels totaling more than 1,600 guest rooms in Ohio, Illinois and Massachusetts previously operated by Waterton. That grows Waterford’s portfolio to 41 properties in nine states, with a total of 6,200 keys.

As a team, the companies now have two balance sheets to provide capital for possible future acquisitions, two sets of investment teams to source deals, the power and reputation of both brand names and strong relationships with different sets of lenders, according to Schwartz.

The companies match up well geographically, he said. Waterford runs a lot of hotels in major markets along the East Coast down to Florida, and along with the Boston area, Waterton focuses much of its attention on California and the Midwest, including the Chicago, Cleveland and Columbus markets.

“We will hopefully create more geographic diversity as we grow.”

The Waterton hotels in this deal are:

• Doubletree Skokie — Skokie, Illinois.
• Doubletree Westborough — Westborough, Massachusetts.
• Courtyard Boston Marlborough — Marlborough, Massachusetts.
• Sheraton Needham — Needham, Massachusetts.
• Westin Columbus — Columbus, Ohio.
• Aloft Beechwood — Beachwood, Ohio.
• Comfort Inn Miami Valley Centre — Piqua, Ohio.
• Doubletree Mt. Vernon — Mount Vernon, Illinois.