Trump’s D.C. Hotel Still Has Inflated Price Even After $100 Million Price Chop

A massive price cut isn’t enough to sway critics on the worth of Washington’s most infamous hotel.

The Trump Organization is nearing a sale for its Trump International Hotel in Washington, D.C., following a reported $100 million price cut, Axios reported this month. D.C. real estate circles thought the property was overpriced when it was first marketed for $500 million in 2019, and the same criticism holds two years later after a new brokerage firm began marketing the hotel for $400 million.

“Every time this asset has been put on the market, off market or on market, it’s always had a number that was unrealistic,” said Thomas Penny, president of Donohoe Hospitality, a firm that owns several hotels in the D.C. area. “If it’s come down $100 million, it’s just a level of sobriety being introduced by the Trump International folks.”

The property, criticized for the way lobbyists and even foreign governments booked rooms to curry favor with the Trump White House, tanked in performance from the pandemic as well as reputationally following the Jan. 6 Capitol Hill insurrection spurred on by Trump supporters.

The $500 million list price put the hotel at just shy of $2 million per room, close to the all-time record high for a U.S. hotel sale using that metric. Even at $400 million, the Trump International sale would equate to $1.5 million per room — besting the all-time record in D.C., currently held by a Rosewood property that traded for $1.3 million per key in 2016.

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While real estate circles still think the price is inflated, the hotel investment world is flush with cash waiting to deploy on opportunities that haven’t really emerged during the pandemic. A trophy asset like the Trump International, despite its poor image, is always going to garner interest from buyers, experts say.

“If they get what it’s listed for, that’s a major premium over the development cost,” said Robert Vitale, a vice president in the D.C. office of hotel advisory firm REVPAR International, noting the Trump Organization spent over $200 million on renovating and adapting the property for luxury hotel use.

Also, the fact that the building and grounds are leased premises rather than outright ownership will also be a consideration: “A big part of the value proposition is based around the notion that there will be a re-positioning and, likely, an affiliation with a prominent luxury brand,” Vitale added.

A Much-Needed Makeover: Buyers affiliated with Hilton, Marriott, and other major brands were reportedly interested in the hotel at the beginning of 2020, but then came coronavirus. None of those groups were interested in shelling out close to the $500 million then-brokerage firm JLL was trying to land in a sale.

But Hilton has long been interested in bringing the Waldorf Astoria brand to D.C., sources told Skift.

Revenue at the D.C. hotel at the start of this year was down nearly 63 percent from 2019, Reuters reported. JLL later dropped brokerage services after the riot. Competing brokerage firm Newmark began marketing the leasing opportunity this summer.

Newmark, the listing agent for the property, nor the Trump Organization responded to Skift’s multiple requests for a comment.

“If they’re able to have it priced right, then it can be a wonderful deal,” said Nicolas Graf, associate dean at New York University’s Jonathan M. Tisch Center of Hospitality. “The location is great, and the D.C. market pre-pandemic was fantastic.”

A Dim Future in Hospitality: The hotel’s sale throws further uncertainty on the Trump family’s future in the hotel business, at least beyond its base of political supporters.

The Trump Organization lost numerous business deals due to the Jan. 6 riot on Capitol Hill. It is also facing charges from the Manhattan District Attorney’s office regarding an alleged 15-year scheme enabling executives to avoid taxes by paying them off the books.

“It’s going to be choppy for all of those travel brands and the Trump brand in general,” Makarand Mody, a professor at Boston University’s School of Hospitality Administration, told Skift earlier this year. “If you’re somebody who is leaning more toward the middle politically, I suspect you’re going to start questioning if you’re going to want to associate with the Trump brand.”

The Chinese Traveler’s Impact on Global Hotel Development

Just because outbound Chinese travel is at a standstill due to the pandemic doesn’t mean hotel developers should write off this usually highly lucrative segment of the travel industry.

The return of unrestricted outbound travel from the world’s most populous country could grow to such demand by 2030 where an additional 2 million hotel rooms are needed around the world, according to a new Bernstein report.

Real estate isn’t built in a day so, while an array of developments are needed around the world, the short-term benefit to existing hotel owners means there will be an extraordinary amount of pricing power due to demand far outstripping supply.

“The scale of this incremental demand cannot be met through a few more hotels in London, Paris, and Tokyo,” the report states. “This source of demand requires entirely new destinations for China tourists.”

The capital spending required to accommodate the estimated 200 million trips by Chinese tourists in 2030 could approach $1 trillion across the transportation, accommodation, and entertainment sectors, per the Bernstein report.

Marriott CEO Charts Growth Path in a Lesiure-Led Hotel World

Marriott CEO Anthony Capuano isn’t writing off the return of business travel, but a publicly traded company like his still needs to show a growth story to shareholders — even in a global pandemic that decimated industry performance.

He doesn’t envision any near-term physical changes to real estate from the shift in traveler profile. But Capuano does see ways where owners of some of the company’s typically business travel-oriented properties can shift strategy and capitalize on the current leisure travel-dominated environment.

“You can’t with the snap of your fingers transform the physical asset,” Capuano said at the Bank of America Gaming and Lodging Conference last week. “But what that means is we rely on the resourcefulness and the adaptability of our associates around the world.”

Some of that resourcefulness includes training concierge teams to know more about leisure offerings when they might have been used to focusing more on corporate travel needs. One property acquired a lot of bicycles to offer guests a way to explore the city. Adding more local flavor to in-room dining menus is another option, Capuano said.

“It’ll be more on the need anticipation and the service delivery side, which is a place where I’m very comfortable in the ability of our associates around the world to not only meet but really exceed the expectations of that evolving traveler,” he added.

Why It Matters: Adaptability helps Marriott still fill hotel rooms and make a convincing argument for hotel owners to sign a franchise agreement for one of the company’s 30 brands. These kind of deals, known as conversions, are a major growth source for publicly traded hotel companies at a time when construction financing is tight for new-build projects.

About a third of Marriott’s hotel openings for the first half of this year were conversions, “which is a very high percentage for us relative to historical averages — maybe not a huge surprise, but a really encouraging set of data,” Capuano said.

The company has so many brands across a variety of price points, from the ultra-luxury St. Regis and Ritz-Carlton to more affordable concepts like Element and SpringHill Suites. There are even soft brand offerings like the Autograph Collection aimed at independent hotel owners who want the affiliation of a big brand without all the costly brand standards of something like a Sheraton or a JW Marriott.

Capuano claims the strong interest in conversion brands continues for Marriott, as evidenced by potential franchisee talks at the recent International Hospitality Investment Forum in Berlin.

“My dance card was full,” Capuano said. “I had 23 owner meetings during the two days that I was in Berlin with owners who are increasingly confident that they have weathered the storm, feeling better about the manner in which they’ve stabilized their balance sheets, feeling good about the discussions they’re having with their lenders, [and] feeling like, as demand recovers, their liquidity is improving.”

The activity is significantly higher than what was happening even a quarter ago, he added. Even new-build talks are happening, but the conversations are “a little more heavily weighted” on the conversion side.

“Now, it’s obviously incumbent on our teams to take those really encouraging discussions and ensure that they translate into signings and ultimately openings,” Capuano said. “But the tenor of the conversation was quite encouraging.”

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