The Great Reshuffling Of Omni Hotels' Portfolio

Omni Hotels & Resorts' portfolio is in flux as the company recalibrates in the wake of the coronavirus pandemic.

The company sold off five hotels in Dallas, Houston, Austin, San Antonio and Jacksonville this month, the latest in a series of closing and selling underperforming hotels to get cash to reinvest in better product, Omni President Peter Strebel told Bisnow. The company will also need to focus on its leisure and resort travel segment, at least for the short term, as it waits for the convention and business travel segment that is typically its bread and butter to return.

It's all geared to help the company re-emerge in a healthy place after a pandemic that initially reduced Omni's workforce by nearly 20,000 people and obliterated the travel that drives its revenue stream. 

Heading into 2020, Omni had roughly 60 hotel and resort locations. Five of those have since been sold, one is closed permanently and three others are still closed with the expectation that they will reopen in the next four to five months.

Strebel said it is time to recapitalize the company to raise money to support the purchase and build-out of new hotels as Omni begins to narrow its focus to what it does best ― catering to leisure, convention and resort travelers.

"When I became president, I put forth a five-year strategic plan, and we put it on the back burner for about six months [when the pandemic began]," Strebel said. "But we geared up again mid-summer, and part of that plan was to sell five hotels that really don't fit our brand anymore. They were in tertiary locations, and the boxes were not really to the quality of where Omni has gone."

Strebel said Omni, while able to maintain itself during the worst U.S. hospitality downturn in history, now has less patience for hotels that operate less competitively when compared to Omni resort and leisure locations that are now achieving 50% occupancy or more on strong days. 

"We have some great resorts and lifestyle hotels like Atlanta Braves and Omni Hotels and the Omni Frisco at The Star that are running occupancies north of 50%, and our resorts are doing well," Strebel said. "We believe probably in the next 4 to 6 weeks, we will be selling out all of our weekends at all of our resorts. There is a lot of pent-up demand. This weekend alone, we saw a strong pickup in our resorts, we ran in the 70 [percent range] in some resorts, and basically north of 50% occupancy in all resorts."

Omni is now achieving close to 30% occupancy on average across its portfolio, Strebel said. That's an improvement from when the hotel operator went to single-digit occupancy as it closed most of its locations in the early days of the coronavirus pandemic.  

Travel is one of America's hardest-hit industries due to the pandemic, with the sector in 2020 experiencing a $429B, or 42%, annual decline in revenue from 2019, according to data from the U.S. Travel Association. Business travel fell off a cliff last year, dropping 70% from 2019, while leisure fell only 27%, the report said. 

As hotel occupancy has grown, Omni has started bringing back its staff. The company just brought 1,600 employees back, bringing it to 6,000 employees, compared to 22,000 before the pandemic. Strebel said it hopes to be back to 10,000 employees by summer. 

Omni's parent company, TRT Holdings, made a tough decision in June to permanently close the Omni Berkshire Place hotel, the brand's only location in Manhattan. TRT Holdings is still holding onto the asset, with rumors swirling it could be sold or converted into office or other uses.

"I think it is a great piece of real estate. It's on 52nd and Madison," Strebel said. "We are privately held, and I think there is a level of emotion to that building, and I think they would like to see it as a hotel at some point again. At this point, there are really no plans. We have been getting a lot of phone calls quite frankly from people who want to buy it and turn it into this, that or something else. At this point, we are just not interested."

With a significant amount of capital raised from the recent five-property sale, Strebel said Omni intends to funnel the money into existing hotel renovations, with a property makeover already underway at its Downtown Austin hotel.

The Dallas-based hotel operator also is looking to finance new build projects and possibly purchase other hotel assets in key South and Southwest markets, like Nashville, Oklahoma City, Louisville and parts of Florida. Many of these growing markets have unmet hospitality demand, and are likely to be powerful hospitality centers when the Covid-19-ravaged hotel sector begins to see light at the end of the tunnel, Strebel said. 

The firm recently opened the Omni Oklahoma City Hotel and has plans to open its Omni Boston Hotel at the Seaport this summer along with the Omni PGA Frisco Resort in DFW in 2023. 

Strebel describes Omni as a sustainable operator that can ride the pandemic wave back to normalcy while also benefiting from asset price changes that impact less fortunate hotels. 

It may look to cushion its leisure travel and resort hotel portfolio in the near future through the strategic acquisition of existing hotel assets that are sold off at discount or in distress because of the pandemic and 2020 recession, according to Strebel — if it can find those bargains.

"That's definitely part of our strategy; however, we really haven't seen that happen yet. It's only been a year since Covid-19 happened and a lot of banks worked out arrangements. But if in some of these locations, they do not return to cash positive, we do expect to see some properties for sale and, hopefully, they will be good properties for Omni."

The future Omni hotel sites Strebel is aiming for are quality assets sitting in critical U.S. locations that cater to leisure and resort travelers. Convention travelers remain a key area of focus for Omni even though Strebel admits that line of business won't get back to normal until 2023 or 2024.

"I think conventions are going to take the longest to return [to normal], and I think they are going to change their scope. I think we will see a lot more smaller meetings and less of the big thousands of people coming to your city for a convention," Strebel said. "I think we will compete well because when we build a convention hotel, we really make it like a center city resort destination."

An example of this type of destination is the new Oklahoma City Omni hotel where small convention groups can hover around a massive pool deck or benefit from a selection of restaurants and other amenities on-site for smaller micro-gatherings. 

Strebel said that while he expects the rise of vaccines and ongoing cabin fever to drive the leisure market this summer, he isn't expecting business travel groups to unfreeze their budgets and begin traveling until later in 2021. 

Even still, Omni has found a silver lining to the pandemic. 

"I actually think Covid has helped us be more strategic and focus on what we are good at and narrow our focus," Strebel said. "I think previously we grew opportunistically. I think our owners when they saw a great deal they looked at it and said, 'Oh, that is such a great deal, let's purchase it.' But I think now, we are looking at it with a much more fine-tuned lens of where are we going to succeed and where are we going to be best at and where are we going to be preferred by customers."

CORRECTION, March 9, 10 A.M. CT: A previous version of this story misquoted Peter Strebel when he described how long it would take for Omni resorts to begin selling out again in terms of occupancy. The story has been updated to accurately reflect his statement.