The Silicon Review
Since its IPO in 1999, Hersha Hospitality Trust has evolved into one of the leading hotel REITs in America. In furtherance of its strategic vision, 2016 was a transformative year as Hersha completed several multi-year value creating initiatives positioning the Company for growth for decades to come.
Across the last several years, Hersha completed over $1.3 billion in hotel transactions, expanding the Company’s presence in its strategic growth markets -Boston, Washington, DC and the West Coast - while reducing its exposure to the challenged Manhattan market and lower growth suburban markets. Today, Hersha’s refined portfolio is concentrated in the nation’s highest demand urban gateway and destination markets, with younger, high growth hotels that dominate the lifestyle and luxury segments.
The vision to success
Hersha’s ability to successfully execute complex and large scale transactions, as both a buyer and seller, while delivering consistent shareholder returns is a distinguishing hallmark of the Company’s success. Hersha continually recycles investment capital and upgrades the quality of its portfolio by selling mature, lower growth hotels, and re-deploying the appreciated capital into newer, market leading hotels that are consistent with the Company’s emerging strategic vision. The result is a differentiated portfolio clustered in the most dynamic markets in the country with sturdy current income and tremendous growth potential.
Focusing on market expansion for maximizing profitability
Hersha’s cycle-tested management team seeks to bridge the compromise between current yield and future growth in its portfolio strategy. The Company concentrates hotels in markets and locations that are expected to grow at a faster rate over the long-term fueled by diverse hotel demand generators and barriers to new competition, with the added benefit of real estate appreciation. The Company focuses on high margin transient-oriented hotels, both branded and independent, that cater to today’s business and leisure travelers and are designed and operated to create powerful customer loyalty.
Pushing the limits to stay ahead of the competitors
The Company's portfolio hotels consistently outperform the competition, delivering robust margins relative to their peers. The margin profile of select service hotels has been the foundation of Hersha’s success, and its independent lifestyle and luxury hotels offer the Company greater profit margin growth and real estate value appreciation.
Making efforts towards sustainable organization growth
Hersha’s investment philosophy is underpinned by valuation, potential earnings growth and the dynamics of the real estate market where the hotel operates. The decision to acquire is made when all of the pieces come together and the Company believes it can bring its unique operational advantage to the investment. This opportunistic and nimble approach has enabled the Company to assemble a portfolio of hotels with durable income streams and attractive growth profiles.
Though Hersha owns hotels across multiple rate segments - from 3 star to 5 star - the Company’s acquisition philosophy is keenly focused on urban gateway and destination markets and their demand fundamentals. The portfolio concentration in New York City, Boston, Washington, DC, Miami and the West Coast drives extraordinary value from the long-term real estate appreciation in these markets, in addition to the sturdy growth in operating income that the hotels deliver.
Driving matchless returns for disciplined growth
While investing in growth through new hotel acquisitions in our strategic markets is a priority, there are times when buying back the Company’s stock is as productive, and allows a return of capital to shareholders, driving their returns. At Hersha, all major decisions are focused on long-term, sustainable value creation and commitment to total shareholder returns. When the Company’s shares are trading below their intrinsic value, or below the private market valuation of the portfolio hotels, management will use excess capital to buy back shares. Over the course of the past several years, Hersha has repurchased over $195 million of its common shares, representing approximately 20% of its public float. Share buybacks, in addition to the Company’s strong dividend policy, are a demonstration of the Company’s total return philosophy, and sustained commitment to shareholder value.
Striving for excellence
Hersha’s is positioned as one of the country’s premiere hospitality enterprises, based on its proven thesis that ownership of high quality real estate generating robust cash flow will outpace the market. The Company’s unique hotel portfolio, characterized by high absolute RevPAR and sector-leading margins, located in the most valuable markets in the country is further supported by a talented management team that thinks like long-term investors and manages like owner-operators - valuable clarity and differentiation in today’s complex and crowded hospitality sector.