New Field & Stream Hotel Brand Gets Backing From Starwood

25.08.2023 - 14:17 / skift.com / Sean Oneill / Barry Sternlicht

Starwood Capital, a real estate investment firm run by Barry Sternlicht — who has scaled up high-end brands W Hotels, St. Regis Hotels, 1 Hotels, Treehouse Hotels, and Baccarat Hotels — said it would help launch a limited-service hotel brand focused on the outdoor sector. Enter the iconic media brand Field & Stream, founded in 1895.

The move underscores how even luxury brand experts find there are more opportunities to grow in the lower end of the hotel chain scale than the upper reaches.

Starwood Capital and AJ Capital, the real estate investor and manager behind university-themed Graduate Hotels, said on Tuesday they were launching Field & Stream Lodge Company, a “modern and affordable lifestyle lodging brand” that will use the brand name of a chain of outdoor recreation stores.

The firms created a 10-year F&S Hotel Fund 1 late last year, targeting $300 million to acquire and develop properties, according to a prospectus for investors a source shared with Skift.

The firms’ prospectus said they would convert or build “30 to 40” hotels with about 4,000 rooms in the U.S. by 2030, though today their press release said “20 to 25 hotels,” perhaps suggesting less investor interest than expected. Each property will typically be 120 rooms, and some rooms will have bunk beds. The pet-friendly properties will have parking lots with electric generators for recreational vehicles.

Starwood and AJ assume there’s a segment of outdoor enthusiasts willing to pay more for design-forward properties whose branding promises a consistent delivery of modern conveniences.

The prospectus suggested that the brand might enjoy an average daily rate of $191 — perhaps roughly $30 above the average for the comparable product in top markets. This niche play would compete mostly against mom-and-pop motels, limited-service branded hotels, and recreational vehicle campsites. In some spots, demand might exceed supply, or the existing lodging has outdated amenities.

The prospectus said the fund would strive to deliver a net return of approximately 16 to 18 percent. A long-time hotel investor commented that the estimated return range is higher than what’s typical for a select-service hotel, likely as a reward tied to the higher risks around whether the new brand will generate enough net operating income while containing capital expenses and financing costs.

One can imagine a few risks. Keeping costs in check may be critical because outdoor enthusiasts tend to be penny pinchers. A related cost risk might be insurance, as the climate crisis leads to more extreme weather, which could create surprises.

In hotels, the sweet spot for margins is to run either a 1,000-room hotel where you can charge $100 a night reliably thanks to conventions