When I first started out in hotel brokerage back in the late 1980s, the market was unsophisticated and had not adopted the fiduciary focus that was required to establish trust. Consequently, the term hotel “broker” had mostly a negative perception. Over the course of the past 35 years, for many professionals, “broker” has moved to a role as a trusted advisor for those who passionately make paramount their fiduciary responsibilities. In this article, I would like to distinguish the difference between the negative connotation of “broker” from the role of a trusted advisor.
1. First and foremost, trusted advisors represent the owner’s interests completely, not their own. They play the long-game and will tell you the truth even when it conflicts with their own short-term self-interest. If you have worked with a broker for years and they have never told you to hold rather than sell, you should consider the implications.
2. Trusted advisors tell you what they really think rather than what you want to hear. While it is important that the broker be able to make the value proposition to investors with conviction, selecting a broker based predominantly on their opinion of value may not result in the best or most honest outcome.
3. Trusted advisors don’t use carrots and sticks. If you are selecting a broker because you are worried they will not show you deals in the future or because they are showing you deals they are not showing to other people, thereby giving you an advantage on the buy side, they are almost certainly doing the same thing on the sell side. Trusted advisors only look out for their client’s best interest and that means finding the best possible buyer from the best possible audience regardless of implications for themselves.
4. Trusted advisors know that direct deals frequently leave money on the table. Hotel buyers want off-market transactions for the simple reason that they are better for buyers. A well-run investment sales process creates competition and leverage for the seller, which provides the best available price, speed, and certainty from potential purchasers. This creates the right kind of discomfort from buyers who are forced to stretch to their maximum level of potential pricing. Without a process, a seller is frequently leaving significant money on the table and will never know if a better deal was available. CBRE Hotels evaluated a representative set of 10 fully marketed institutional sales processes and found the price increase by the ultimate buyer from the first round to the closing price averaged 9% per deal resulting in aggregate incremental pricing of over $100 million to our clients.
5. Trusted advisors manage the transaction process for a living, while most owners focus on creating value. This transaction skill set lets the advisor do what they do best, while the owner is more productive doing what they do best.
6. Every transaction has an inherent conflict of interests—the seller wants to sell high; the buyer wants to buy low. It is a direct conflict that a professional trusted advisor can mediate.
7. Trusted advisors anticipate and mitigate challenging issues before they happen based on years of transaction experience. Every hotel transaction has aspects that investors are likely to push back on and a good advisor will identify investor predispositions and strategies and find data-driven mitigants to offset what will likely be used to lower price.
After 35 years of selling hotels, I am certain that trusted advisors add significant value for owners. I would recommend engaging a trusted advisor to help you achieve your hotel investment goals.
Bob Webster is the President of CBRE Hotels Institutional Group and specializes in high-value investment sales in the United States. He can be reached at bob.webster@cbre.com. This article was published in the March 2023 edition of Lodging.