Hotelier Kendra Plummer is showcasing just how powerful embracing inclusion can be when pooling capital for real estate investments. Her firm Elise Capital currently owns three hotels representing $30 million in portfolio value, focusing on mid-scale select, limited service, and extended stay hotels in secondary/tertiary markets. Remarkably, she’s built her portfolio by raising capital from members of diverse and under-represented populations. 14% of her investors are veterans, 51% women, and 88% African American.
The gravity of this feat is especially noteworthy considering that despite representing nearly 20% of employment in the hotel industry, African Americans make up less than 2% of hotel owners, and African American women represent half of that (according to NABHOOD, the National Association of Black Hotel Owners, Operators, and Developers).
Plummer argues this severe lack of representation creates a self-reinforcing pattern that discourages African Americans from acquiring and investing in hotels. “It’s very hard for investors to visualize investing in these types of assets if we aren’t seeing our communities included in it, she said.” What makes this even more ironic is just how much the African American community spends on leisure travel ($109.4 billion according to a 2019 NABHOOD report). “We are communities that largely spend in the tourism industry, so it absolutely makes sense to have a stake of ownership in it as well.”
Understanding the importance of educating members of her community on the nuances to hotel investing, Plummer established an educational arm of her firm in 2020, offering course and webinars to burgeoning hoteliers. Helping individuals learn how to evaluate opportunities and understand the attractive return metrics that characterize the hotel industry has not only driven significant enthusiasm amongst a growing demographic but helped form a base of 30-40 passive investors in each of her own three deals, including two Hampton Inns and a Holiday Inn.
When asked what makes hotels such a compelling investment opportunity, Plummer explained. “I think investors should focus on hotel assets versus more traditional real estate because of the adaptability of the business. Hotels are both a real estate asset and a dynamic operating business, most often leveraging a franchise model. This allows hotels to experience appreciation in growing markets, while maintaining more control on revenues in that you can adjust pricing immediately, which is key in today’s climate where expenses continue to rise.”
High barriers to entry have often prevented others from following in Plummer’s shoes, but hotel brands like Marriott, Hilton, Wyndham, and Choice Hotels are all taking on an increasingly proactive approach to attracting diverse owners, often reducing upfront franchise fees, funding essential “key money” to complete critical upgrades to maximize hotel performance, as well offering as other financial and operational support. In Plummer’s view, these programs are critical in creating a robust forward pipeline of owners like her. “Despite the ever-present obstacles to becoming a hotelier, having access to the support of large brands has allowed me to move faster while also reducing deal risk,” she said.
When asked if investors from specific professions are more drawn to her deals, she explained “I have found that professions in which people travel frequently are more open to investing in hotels. For example, a solid percentage of my investors are pilots.” Plummer also takes pride in the fact that for most of her investors, this represents their first hotel investment. “I’m encouraged by the fact that so many individuals are being exposed to an asset class they previously had little or no visibility to. About one quarter of them are already repeat investors, which is a really encouraging sign that once they learn about hotels, they’re here to stay.”