Target Information

Ares Management has collaborated with Excel Group to invest in a portfolio comprising eight limited-service, select-service, and extended stay hotels affiliated with prominent brands Hilton and Marriott. These properties are strategically located in high-demand markets along the East Coast, representing a significant opportunity for expansion for both Ares and Excel. Though the financial terms of the investment remain undisclosed, this transaction is poised to enhance both parties’ positions in the competitive hospitality sector.

Industry Overview

The hotel industry in the United States, particularly in the limited-service and extended stay segments, has shown robust growth, driven by increasing consumer demand. According to JLL, there was a notable rise of 232,000 room nights in 2024 compared to the previous year, underscoring the sustained interest in this segment. This growth is largely fueled by the ongoing recovery in business travel and the rising need for temporary housing solutions.

Moreover, as interest rates stabilize, experts predict that investment activity within the hospitality sector will strengthen further, particularly in urban environments. The limited-service and extended stay markets have garnered favorable attention due to their adaptability and the preference from travelers for cost-effective lodging solutions during extended trips.

The evolving nature of travel trends, including the surge in remote work and temporary relocations, has resulted in increased investor interest in this sub-sector. As travelers seek flexible accommodations, the demand for select-service hotels that provide quality amenities without the high costs of full-service establishments continues to grow.

Overall, the current landscape indicates a positive outlook for the limited-service and extended stay hotel market, suggesting ample opportunities for both established and new players in the industry.

Rationale Behind the Deal

This strategic partnership between Ares and Excel is aimed at leveraging the growth potential within the limited-service and extended stay hotel sectors. By combining resources, Excel can allocate growth capital towards the acquisition of additional Hilton and Marriott-branded properties across the United States, thereby enhancing its portfolio and market positioning.

According to Shoham Amin, founder and principal of Excel Group, this transaction marks a critical milestone for the firm. The support from Ares is expected to bolster Excel's continued expansion efforts within the hospitality domain.

Investor Information

Ares Management is a leading global alternative investment manager with over $525 billion in assets under management as of 2024. The firm specializes in various investment strategies, including real estate, private equity, and credit. Ares’ Co-Head of Real Estate Secondaries, Jamie Sunday, stressed the company's commitment to strategically growing their hospitality portfolio through further acquisitions.

Excel Group, established in 2011, has made significant strides in the hospitality market, managing a portfolio valued at approximately $1 billion. Their focus is on limited-service and extended stay hotels, making them a strategic partner for Ares in this investment venture.

View of Dealert

From an investment perspective, this partnership between Ares and Excel Group appears to be a prudent move, considering the strong demand for select-service and extended stay hotels. As businesses resume travel and workers seek temporary accommodations, the market is expected to thrive, thereby enhancing the profitability of their investments.

Additionally, the backing of Ares provides Excel with substantial financial resources, allowing for aggressive growth and acquisitions within this sector. This support will enable Excel to capitalize on favorable market conditions and continue building a diversified portfolio of high-demand hotel assets.

Moreover, as interest rates stabilize, the projected upswing in hospitality investment activity signals a favorable environment for both companies, making this deal a timely opportunity to expand their reach in a competitive landscape.

Ultimately, this collaboration demonstrates the increasing influence of private equity in the hospitality sector as firms adapt to shifting traveler preferences and work to seize emerging growth opportunities. As such, it is highly likely that this investment will yield positive returns in the coming years.

View Original Article