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Huh, Amazon just bought a hotel… but why?

(REAL ESTATE CORPORATE) Amazon is everywhere, and now they are a new owner of a Residence Inn hotel by Marriott in Arlington, Virginia. But for what purpose?

Open hotel door, is Amazon getting into hotel hospitality?

Amazon is everywhere these days. It is a delivery service that offers free two-day shipping with Amazon Prime. It is a grocery store with its food delivery service, Amazon Fresh. It is a television and film producer and distributor through the company’s Amazon Studios. And now, is it a hotel?

The giant e-commerce company has recently purchased the Residence Inn by Marriott near its second North American headquarters (HQ2) in Arlington, Virginia. But, no need to fret, Amazon isn’t going to be a hotel chain any time soon… yet. However, the company has tried steering in that direction already with Alexa for Hospitality, which offers a voice control system for hotels.

This hotel is part of the 11.6-acre development expansion in PenPlace — Arlington County’s largest undeveloped lot. But, the hotel isn’t what Amazon is interested in. The location is. According to an Amazon spokesperson, the hotel will be demolished. Even though it doesn’t need to be removed for development to continue, it’s still going to be taken down. With it gone, Amazon will be able to “maximize its new space and create a cohesive employee campus that aligns with its vision.” According to Forbes, Amazon has committed to employing 25,000 people by 2030. So, it’s going to need to maximize that space to fit everyone in it.

And, this expansion comes with a $148.5 million price tag. Acorn Development LLC, a subsidiary of Amazon, from Blackstone Group LP made the purchase back in September this year. In July of 2019, Blackstone had purchased the property for only $99.1 million. By Amazon purchasing the property, Blackstone profited almost $50 million.

With the hospitality industry being hit so hard by the pandemic, will other companies follow Amazon’s lead? Will they see hotels as an opportunity to acquire a good amount of space for a sweeter price with the added bonus of not having to deal with the landlords?

In a statement, Frank Cohen, chairman and CEO of Blackstone’s non-traded real estate investment trust, said, “This sale illustrates our ability to generate value for our investors by identifying attractive real estate assets in desirable locations. We will continue to invest in assets where we have high conviction and selectively sell where we see compelling pricing.”

While this all makes sense, I’m not so sure if buying hotels is going to be something all companies will shift to. In this case, the Residence Inn in Pentagon City that Amazon purchased helped the company secure control over an entire 11-acre square block in PenPlace. So, Amazon’s decision is not based on the hotel. Instead, it is based on how purchasing that hotel property is going to help them achieve its HQ2 plans.

However, hotels as real estate could be a benefit for struggling hotels. Hotels who might not be able to sail through this storm could try to get as much as they can. And investors, maybe they could make a profit like Blackstone.

Veronica Garcia has a Bachelor of Journalism and Bachelor of Science in Radio/TV/Film from The University of Texas at Austin. When she’s not writing, she’s in the kitchen trying to attempt every Nailed It! dessert, or on the hunt trying to find the latest Funko Pop! to add to her collection.

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