CoStar Acquiring STR is a Gamechanger for the Hotel Industry

John Wijtenburg
Oct 1, 2019 · 3 min read
Glasses in front of analytics screen
Glasses in front of analytics screen

CoStar Group, a commercial real estate data company, announced its acquisition of Smith Travel Research (STR) for $450 million last night. This is a gamechanger for the hotel industry in so many ways.

Very few companies can claim revolutionary status in an industry as diverse as lodging. STR is, without question, one of those companies. It started as a small data company with a big dream in the 1980s. Today, the data it provides is the cornerstone of every major operational and investment decision.

The future of hotel data is complex. CoStar is the hero our industry deserves.

Legitimacy

Smith Travel Research opened the world of hotel investing to a massive audience by providing transparency. This allowed risk averse institutions to get into the game.

In a way, CoStar did the same for major CRE asset classes by consolidating disparate sale and leasing data.

Traditional CRE investors are still gun-shy with hotels, though.

They’re perceived as overly risky even as a passive investment behind an experienced operator. Much of this perception is based on an outdated understanding of the industry.

Well-located select service and extended stay hotels operate with generous profit margins, and with the right supply/demand dynamic, they possess attractive insulation from major demand shocks.

CoStar understands their customers and has the reach to develop education and products to meet the needs of cautious entrants.

Reach

STR barely penetrates the global hotel market. They currently provide data services to only 15,000 of the 350,000 international hotels.

CoStar, on the other hand, has wide global distribution through corporate operations and strategic partnerships. This global presence will allow STR to penetrate these other markets.

This reach will allow STR to open the door, through increased transparency, to emerging markets in the same way it exposed the US market.

Innovation

Traditional lodging is fading into oblivion.

Brands have been differentiating for years. Select and limited service hotels evolved from full service and highway motels, respectively, to meet modern guest expectations. Extended stay hotels evolved from corporate apartments for a seamless, reliable long-term stay.

Today, home sharing, lifestyle independents, soft brands, hostels, and any other niche can rapidly steal market share from traditional lodging. The industry needs a data provider at the cutting edge to provide products and services that allow hotels to compete with these threats head-on… and win.

As a publicly traded company with deep pockets and diverse talent, CoStar Group, has the resources to modernize STR for the next generation of hoteliers.

John Wijtenburg is a hotel investor and operates Hotel Investor Toolbox, a website to help investors build and improve their hospitality business. He specializes in acquisitions support, capital advisory, and asset management. This post reflects the views of the author and does not represent the views of any clients or employers.

Welcome to a place where words matter. On Medium, smart voices and original ideas take center stage - with no ads in sight. Watch
Follow all the topics you care about, and we’ll deliver the best stories for you to your homepage and inbox. Explore
Get unlimited access to the best stories on Medium — and support writers while you’re at it. Just $5/month. Upgrade