The sale and conversion of a former Ramada Inn at I-465 and Pendleton Pike on the northeast side is bringing a new extended-stay hotel brand into the market.
Suburban Houston real estate investors Ryszard and Claire Zadow bought the troubled 187-room hotel at 7701 E. 42nd St. in an online auction last June for $1.3 million, but the sale didn’t close until Sept. 20. The Zadows own the Indianapolis franchise rights for ExtendASuites, a Texas-based company that started in 2010, and have already rebranded the hotel with that name.
They are in the process of converting it into an extended stay hotel, a segment of the hotel market in which rooms have kitchen appliances and are typically rented by the day, week or month.
Claire Zadow said she and her husband initially will sink about $500,000 into adding a full-size refrigerator and microwave oven to each room and updating finishes. Some exterior improvements already have happened, but most of the work is to be done indoors.
Interior work on the hotel is expected to start next week and finish in time for the Super Bowl. She said the crowds drawn by the Feb. 5 football game “will be a nice little boost for us.” But the property won’t typically rely on such high-profile events to draw customers. In the long run, Zadow predicted the local hotel will snag some of the city’s convention traffic and will appeal to people such as construction workers who are here on temporary work assignments.
“It’s a busy city in the center of the country and is a growing convention area,” she said, explaining the draw of Indianapolis and hotel ownership, both of which are new for the couple. Most of Zadow’s holdings are apartment complexes and single-family rentals in Texas.
The former Ramada, built in 1970, has more than 6,000 square feet of meeting space. It was in the hands of New Jersey-based Unity Bank, which hired Jones Lang LaSalle last spring to sell the property. JLL took it to market via its joint venture partner, auction.com.
Mark von Dwingelo, a senior vice president of Jones Lang LaSalle’s hotel unit who represented the seller, said the hotel market is in a trough that is attracting investors who want to buy near the bottom of the market.
Indianapolis, in particular, is a good market for investors, he said, because of its interstate network and airport and because it’s relatively inexpensive to invest here. “You aren’t competing with the international dollars” that invest in first-tier markets like New York, Chicago and San Francisco, he said.
Von Dwingelo said the market hit bottom in 2009 and stayed there throughout 2010. After rebounding over the first seven months of this year, he said the hotel market stalled in late summer. Revenue per available room, an indicator of hotel performance arrived at by multiplying occupancy by room rental rates, hit a plateau in August, he said.
He said many hotels are worth only half what they were when the market peaked in the middle of 2007.
David Lee of locally based Lee Hospitality, which owns and manages 10 hotels under the Candlewood Suites and Suburban Extended Stay brands, said extended-stay hotels generally have better occupancy than traditional hotels. But extended stays have been hurt by the country’s economic woes just like traditional hotels, he said, noting that demand is healthy but room rates are depressed.
The development pipeline for new product is bone dry, Lee said, meaning most of the activity in the hotel sector over the next two or three years is going to be in acquisitions and conversions.