Comfort Suites Galveston
HVS, as the sole and exclusive advisory firm to Ownership, presents the opportunity to acquire the 57-key Comfort Suites Galveston, a limited-service hotel asset in Galveston, Texas. This offering would allow a private investor the ability to acquire an upper-midscale hotel asset at a price well below replacement cost with a minimal change-of-ownership PIP in a high-barriers-to-entry submarket.
Ideal Opportunity for an Experienced Owner/Operator to Improve Performance and NOI Flow-Through
The 57-key count is considered an ideal size for an experienced owner/operator.
According to the past three years of financial statements, the hotel registered an average gross operating profit (GOP) below 30.0%.
Based on a selection of operating statements from similarly aged Choice-affiliated hotels, the hotel should achieve a stabilized GOP margin between 45.0% and 50.0%.
We see multiple opportunities for improvement that could lead to a collective decrease in rooms expense, specifically in the payroll department.
Per the December 2023 STR data, the hotel came in sixth out of six competitive hotels in terms of occupancy, with a 62.3% penetration index; in addition, it recorded the lowest RevPAR among the competitive set. Given the upper-midscale brand affiliation and recently renovated product, there is flexibility for a new operator to increase occupancy and improve RevPAR.
Based on HVS pro-forma projections, stabilized rooms revenue in 2025 is anticipated to exceed $1,550,000 ($74.00 RevPAR), with an NOI flow-through of $487,000 (rounded).
High-Barriers-to-Entry Market with Beach Access
Galveston is a high-barriers-to-entry market due to limited developable land, limited franchise availability, strict zoning regulations, and a historic district that restricts new construction.
The property has an irreplaceable location just off Seawall Boulevard where guests can walk to the beach and Galveston Fishing Pier.
Robust Drive-to Leisure Market of Galveston
An investor will have an exceptional opportunity to purchase an asset strategically located within the “Texas Triangle” of Austin, Dallas, Houston, and San Antonio. There are approximately 21 million residents within a four-hour drive of Galveston.
There are numerous festivals, special events, sporting events, and gatherings held throughout the year in Galveston, with particularly strong demand generated during the spring and summer months.
Tourism demand in Galveston has increased in recent years along with city-wide efforts to improve local roads and infrastructure, expand the beaches, and improve the cruise-ship terminals. Per the 2023 Galveston Economic Impact of Tourism Study, completed by city officials last summer, tourist visitation reached a peak of 8.1 million visitors in 2022, a 25.0% increase from 2021 and a 10.9% increase from 2019. These visitors spent a record $1.2 billion, which directly affected the local economy.
Choice International Franchise
An investor can expect a new, 20-year franchise license agreement with Choice Hotels International upon completion of the brand-mandated change-of-ownership PIP.
Given the recent renovations, a minimal change-of-ownership PIP is expected.
Excellent Location Among Strong Corporate and Leisure Demand Generators
The property benefits from very good visibility along the Galveston Seawall and from its proximity to dining, retail, and entertainment options, which is a positive attribute for both business and transient guests. Guests can easily walk across the street to access the many beaches along Seawall Boulevard.
Corporate demand generators in the area include the University of Texas Medical Branch (UTMB), Galveston College, Texas A&M University, Landry’s, Moody Bank, American National Insurance Company, Mitchell Historic Properties, and Marathon Petroleum.
Leisure demand generators in the area include Moody Gardens, Schlitterbahn Water Park & Resort, Pleasure Pier, 61st Street Fishing Pier, Galveston Island Convention Center, and historic Downtown Galveston.
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