REPORT FROM THE U.S.—The dollar volume of U.S. hotel transactions is gaining speed, according to LW Hospitality Advisors LLC’s Select Major 2011 U.S. Hotel Sales Survey.
The survey recorded 130 single-asset sales of more than US$10 million that were not part of a portfolio transaction. The deals totaled approximately US$8.9 billion and comprised approximately 41,000 rooms. In comparison, LWHA’s 2010 survey identified 84 transactions totaling more than US$5 billion comprising 24,000 rooms.
Total hotel property transactions for the year amounted to US$14 billion, up from US$8.6 billion a year ago, according to data compiled by STR Analytics, sister company of HotelNewsNow.com.
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Daniel Lesser
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Despite a hiccup during the second half of 2010 caused by a breakdown in the capital markets, Daniel Lesser, president and CEO of LWHA, expects the 2012 transactions market to continue gaining momentum.
“At the end of the day, you have a tsunami of debt coming due in the next 18 to 24 months,” Lesser said. “That’s going to trigger a lot of activity.”
Chad Crandell, president and co-founder of asset-management company Capital Hotel Management, said there is a lot of “pent-up demand” on the part of buyers and sellers that will manifest itself once the public markets regain stability.
“Having the public companies on the sidelines … took a lot of the wind out of the sails,” he said.
Deals this year will involve large headline deals and lower-priced transactions, Lesser said. “Smart money is discovering in the secondary and tertiary markets there are great opportunities to be had as well,” he said.
Buyers likely will include private equity and real-estate investment trusts, which backed away from deals during the capital markets chaos in 2011, but could return to the buying game this year.
“There’s no question they will come back to the market,” Lesser said of the REITs. “The only question is when.”
Foreign capital (from countries such as France, Germany, Spain, Israel and China) looking for safety and discounts on hotel trades also could be a factor in this year’s deal market.
The largest deal on LW’s list is Host Hotels & Resorts’ US$570-million buy of the 1,625-room Manchester Grand Hyatt San Diego. The estimated price per room of that transaction was US$350,769.
That acquisition notwithstanding, the U.S. market represents cheaply priced deals on a “per-pound relative basis” compared to regions such as Europe and Asia/Pacific, Lesser said. Such a development is one reason why foreign investors could become more active in the United States during 2012, he said.
“It’s a great time to buy,” Lesser said. “There’s a broad range of opportunities, from fresh equity on a project to … portfolio (deals) to foreclosures.”
