Proven tenets provide framework for making decisions, executing strategies
The economy is shifting, rocked hard by a lingering pandemic and harder still by record-level inflation, ongoing supply chain disruptions, capital compression, labor shortages and growing concerns about a recession. Our customer demands are changing, too.
Amid all this, in lodging, strategic pivots continue to be important.
Knowing whether, when and how to pivot is no easy feat. Fortunately, The Johnson Group’s Guiding Principles provide a framework for how OTO Development makes decisions and executes strategies. The company leans on these proven tenets to navigate the challenges — and make the most of the opportunities — created by COVID’s cascade of consequences. With steady focus on Principled Entrepreneurship, the company has embraced change in order to satisfy the evolving needs of customers while still creating long-term value by unlocking opportunities others missed.
Over the past two years, OTO’s real estate investment strategy pivoted from primarily ground-up construction in urban markets to include acquisitions that are ripe for repositioning in beachfront locales. Today, acquisitions make up the majority of the company’s growth pursuits.
In 2021, OTO invested $630 million in 12 hotels, the highest number of deals delivered in a single year since 2006. Of these 12 transactions, 11 were acquisitions of existing hotels, 10 of them in leisure-driven markets with either a beach or a national park.
Compare the characteristics of 2021’s deals to years past. From 2010-2019 — the timeframe between emerging from the Great Recession through the start of the COVID-19 pandemic — OTO invested in 34 assets; 29 of these were ground-up construction and only 20 percent were in primarily leisure-driven markets. So, a significant pivot.
Where is OTO now? Midway through 2022, the company has not given up entirely on new development. The company recently opened the Gulf Coast’s first beachfront Hyatt property — the brand-new, on-the-sand Hyatt Place Panama City Beach — and an art-drenched AC Hotel in the heart of downtown Bethesda, Maryland, just a block away from Marriott’s new corporate headquarters. OTO is under construction with two AC Hotels in Jacksonville and Naples, Florida, and the company is under contract to purchase a third AC Hotel in Florida as soon as construction is complete.
Meanwhile, OTO’s purchasing/repurposing strategy continues to yield impressive results. June saw the debut of Lumina on Wrightsville Beach, A Holiday Inn Resort. A repositioning project without rival along the North Carolina coast, it included an extensive interior redesign, the creation of multiple F&B concepts, and behind-the-scenes improvements to HVAC and mechanical systems. The hotel was rebranded with a name that draws on the storied history of an iconic beach pavilion designed in the early 1900s to showcase the wonder of electricity.
A creative rebrand and redesign is in the works for OTO’s recently acquired Best Western in Fort Walton Beach, Florida, which will be fully reimagined; plans are also underway to refresh Dunes Manor in Ocean City, Maryland. OTO’s newest acquisition is DoubleTree North Redington Beach (pictured above). Built in 1987, it’s a consistent top-performer — despite age, wear and tear — and one of only three Hilton-branded properties in the Tampa Bay region. The company is therefore intrigued by the possibilities this DoubleTree holds once fully refreshed and operating with scaled efficiencies.
OTO is also under contract on the existing Aloft in downtown Tampa, Florida. This hotel sits in the middle of fantastic demand generators in both the corporate and leisure segments.
More pivots are possible as OTO Development continues to adjust its sails in an ever-changing landscape of opportunities.