Interviews David Phelps on Hotel Sub-Brands and the Outlook for Southern California

David Phelps, a partner in the real estate practice at Akin Gump, spoke with for the Q&A column “How Are Hotels Juggling Sub-Brands?” The article examines what the growth of sub-brand hotels could mean for room rates, oversupply in the market and the ability to refinance.

Phelps said sub-brands have traditionally been a way for hotel chains to “increase overall market share and expand overall brand loyalty.” They have also created opportunities for expansion where certain restrictions in existing hotel agreements might otherwise prohibit any such growth.

The over-building of these hotels, Phelps said, has led to a flattening of daily rates, which in turn, “will make it more difficult for owners to obtain and maintain the loan sizing they would otherwise seek.” One suggestion he has is for owners to build into their hotel agreements “provisions addressing the marketing of new brands to require future marketing of new brands not be to the exclusion of existing brands.”

Regarding the future of hotel development in Southern California, Phelps said hotel owners and developers are very bullish on the Los Angeles area with “significant hotel development and renovation underway.” He noted there will always be a need “for more hotel rooms across a very wide swath of unique neighborhoods – from Ocean Avenue to Pasadena and everywhere in between.”