THE OFFERING
HVS Brokerage & Advisory, as the sole and exclusive advisory firm to ownership, is pleased to present the opportunity to acquire the 67-key Hampton Inn & Suites by Hilton Hobbs, a limited-service hotel asset in Hobbs, New Mexico. The potential exists for a conversion of the Hotel to a Spark by Hilton, which would align well with the local market's demand profile.
The property benefits from its strategic location along North Lovington Highway in Lea County, which ranks #1 in oil production nationwide, and is surrounded by key demand generators including major energy companies, such as Halliburton and Patterson-UTI Drilling Co., and nearby educational institutions and hospitals. Additionally, the property is located within a short drive of Zia Park Casino & Racetrack, which regularly attracts highway travelers given its proximity to the Texas/New Mexico border.
PROPERTY HIGHLIGHTS
Spark by Hilton Conversion Opportunity
New ownership will be required to rebrand the hotel at closing.
The Spark by Hilton franchise is available, and the seller has provided a copy of the conversion property improvement plan (PIP), which can be found in the virtual deal room (VDR).
Current estimates for the Spark conversion are approximately $20,000 per key, or $1.34 million (rounded).
Given that the Hobbs market caters to working-class, oil-and-gas (O&G) clientele, the Spark by Hilton brand is uniquely positioned to capture midscale room-night demand; thus, no negative impact on rooms revenue would be expected upon the conversion.
Operational Upside Potential for a Robust Operator
Per the trailing-twelve-month (TTM) July 2024 profit-and-loss (P&L) statement, the hotel’s gross operating profit (GOP) was 29.6%, with a net operating income (NOI) flow-through of about $434,000 (rounded). Great upside exists for a more “hands-on” operator to restructure the hotel’s operations to maximize NOI flow-through.
Based on a selection of similar vintage Hampton operating statements, the hotel should achieve a stabilized GOP margin between 44.0% and 47.0%.
Multiple opportunities for improvement exist that could lead to a collective decrease in rooms expense, specifically in the payroll department.
In comparison to other markets across the country, New Mexico’s property tax rates have historically been lower. For example, the hotel’s annual property tax expense averaged $15,000 per year ($232 per key) over the last five years.
Increasing Revenue Trend & Stable Operating History
The hotel’s rooms revenue for the TTM period through August 2024 increased by 10.4%, compared to the same period last year.
From 2021 through 2023, rooms revenue consistently averaged over $1,700,000.
Attractive Rooms Revenue Multiplier (RRM): 2.7x
Based on the $5,200,000 pricing guidance, the hotel asset underwrites to an attractive 2.7x RRM based on the TTM August 2024 rooms revenue.
Ideal Location in Strong-Performing Oil & Gas Market
West Texas Intermediate (WTI) prices have ranged from $70 to $80 a barrel to over the last six months.
The Permian Basin underlies Lea County, which ranks #1 in oil production across the country.
Diverse Mix of Demand Sources
Opportunities exist for group business from local educational institutions, energy companies, and hospitals.
Approximately 1,500 passengers travel through Lea County Regional Airport in Hobbs monthly.
Leisure demand generators in the area include the Western Heritage Museum & Lea County Cowboy Hall of Fame, Lea County Center for the Arts, and Harry McAdams State Park.
Zia Park Casino Hotel & Racetrack, located within a five-minute drive of the property, attracts 2.2 million visitors annually given that Hobbs is located along the Texas/New Mexico border.
Major employers in the area include Halliburton, ConocoPhillips, Chevron, Baker Hughes, Lea Regional Medical Center, Patterson-UTI Drilling Co., Ferguson Construction, and Key Energy Services.
Discount to Replacement Cost
To construct a similar limited-service hotel asset with comparable amenities, the estimated all-in investment would be a minimum of $110,000 to $130,000 per key.
This opportunity presents an investor with the ability to acquire the property at a price well below replacement cost, at $77,000 (rounded) per key.
PHOTO GALLERY
MAP
CONTACT US
Investment Sales Contacts
Eric Guerrero
Senior Managing Director, Partner, Brokerage & AdvisoryHVS
Houston
+1 (713) 955-0012
eguerrero@hvs.com