Operational Upside Potential for a Robust Operator
During its initial ramp-up period after opening in July 2019, the hotel was negatively affected by the COVID-19 pandemic, which resulted in issues with overall performance, employee retention, and sales efforts. Collectively, these matters contributed to the subpar performance and cash flows.
Based on the July 2022 Monthly STR Trend Report, the hotel has registered an average RevPAR penetration of 78.8% since its opening. Given the newer construction, location, and IHG brand affiliation, great upside exists for a more “hands on” operator to restructure the hotel’s operations, establish yield-management strategies, and initiate cost-containment initiatives to maximize RevPAR penetration and NOI flow-through.
Strong Market Fundamentals and Rebounding Hospitality Industry
Given the wide distribution of COVID-19 vaccines, hospitality industry reports indicate that domestic drive-to leisure markets are rebounding strongly.
Year-to-date July 2022 room-night demand for the hotel and its competitive set increased by 22.3% and 35.5%, respectively, compared to the same period last year.
With the recent conversion of the 128-key Holiday Inn Kemah (near the Boardwalk) to a Courtyard by Marriott, the hotel benefits as the sole IHG product in the submarket by garnering the entire share of the IHG system bookings.
Additional Development Opportunity
This offering includes about an acre of vacant land that fronts NASA Parkway and which has the potential to be developed into a retail establishment, quick-service restaurant, or economy lodging.
Well-Maintained, High-Quality Physical Product with Minimal PIP Expected
The hotel opened in 2019, and ownership has maintained the physical asset well; thus, a minimal change-of-ownership PIP is expected.
To construct a similar asset with comparable amenities, the estimated all-in investment would be a minimum of $120,000 per key.
Excellent Location Among Attractive Guest Amenities & Demand Generators
The property is less than three miles from the 60-acre Kemah Boardwalk outdoor theme park. The Boardwalk is home to more than ten restaurants, a collection of rides and roller coasters, carnival games, retail shops, and a 400-slip marina. The numerous dining, retail, and entertainment options are positive attributes for both business and transient guests. Additional leisure demand generators include the NASA Johnson Space Center and nearby areas of water that provide opportunities for outdoor water-related activities, such as swimming, diving, boating, jet skiing, and fishing.
Corporate demand generators in the area include the University of Houston-Clear Lake campus, Arkema, Honeywell, Celanese, Bayer, DuPont, LyondellBasell, Good Year, and ExxonMobil, as well as the Bayport Industrial District and the Port of Houston.
While the $201-million expansion of U.S. Highway 146 is scheduled to be completed by the spring of 2024, Seabrook city officials have noted an increase of commercial development interest in the area. A notable development is the 19.5-acre, mixed-use project known as The Edge at Seabrook Town Centre. The upscale development will feature a new, 320-unit multifamily apartment building, over 19,000 square feet of retail and restaurant space, green space, and an outdoor plaza.
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