HVS, as the sole and exclusive advisory firm to Ownership, presents the opportunity to acquire the 57-key Comfort Suites Galveston, a limited-service hotel asset in Galveston, Texas. This offering would allow a private investor the ability to acquire an upper-midscale hotel asset at a price well below replacement cost with a minimal change-of-ownership PIP in a high-barriers-to-entry submarket.
Ideal Opportunity for an Experienced Owner/Operator to Improve Performance and NOI Flow-Through
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The 57-key count is considered an ideal size for an experienced owner/operator.
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According to the past three years of financial statements, the hotel registered an average gross operating profit (GOP) below 30.0%.
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Based on a selection of operating statements from similarly aged Choice-affiliated hotels, the hotel should achieve a stabilized GOP margin between 45.0% and 50.0%.
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We see multiple opportunities for improvement that could lead to a collective decrease in rooms expense, specifically in the payroll department.
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Per the December 2023 STR data, the hotel came in sixth out of six competitive hotels in terms of occupancy, with a 62.3% penetration index; in addition, it recorded the lowest RevPAR among the competitive set. Given the upper-midscale brand affiliation and recently renovated product, there is flexibility for a new operator to increase occupancy and improve RevPAR.
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Based on HVS pro-forma projections, stabilized rooms revenue in 2025 is anticipated to exceed $1,550,000 ($74.00 RevPAR), with an NOI flow-through of $487,000 (rounded).
High-Barriers-to-Entry Market with Beach Access
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Galveston is a high-barriers-to-entry market due to limited developable land, limited franchise availability, strict zoning regulations, and a historic district that restricts new construction.
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The property has an irreplaceable location just off Seawall Boulevard where guests can walk to the beach and Galveston Fishing Pier.
Robust Drive-to Leisure Market of Galveston
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An investor will have an exceptional opportunity to purchase an asset strategically located within the “Texas Triangle” of Austin, Dallas, Houston, and San Antonio. There are approximately 21 million residents within a four-hour drive of Galveston.
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There are numerous festivals, special events, sporting events, and gatherings held throughout the year in Galveston, with particularly strong demand generated during the spring and summer months.
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Tourism demand in Galveston has increased in recent years along with city-wide efforts to improve local roads and infrastructure, expand the beaches, and improve the cruise-ship terminals. Per the 2023 Galveston Economic Impact of Tourism Study, completed by city officials last summer, tourist visitation reached a peak of 8.1 million visitors in 2022, a 25.0% increase from 2021 and a 10.9% increase from 2019. These visitors spent a record $1.2 billion, which directly affected the local economy.
Choice International Franchise
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An investor can expect a new, 20-year franchise license agreement with Choice Hotels International upon completion of the brand-mandated change-of-ownership PIP.
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Given the recent renovations, a minimal change-of-ownership PIP is expected.
Excellent Location Among Strong Corporate and Leisure Demand Generators
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The property benefits from very good visibility along the Galveston Seawall and from its proximity to dining, retail, and entertainment options, which is a positive attribute for both business and transient guests. Guests can easily walk across the street to access the many beaches along Seawall Boulevard.
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Corporate demand generators in the area include the University of Texas Medical Branch (UTMB), Galveston College, Texas A&M University, Landry’s, Moody Bank, American National Insurance Company, Mitchell Historic Properties, and Marathon Petroleum.
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Leisure demand generators in the area include Moody Gardens, Schlitterbahn Water Park & Resort, Pleasure Pier, 61st Street Fishing Pier, Galveston Island Convention Center, and historic Downtown Galveston.
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