Strong hotel sales in 2013 a positive sign for 2014. Increasing hotel sales in the U.S. portend a strong several years of investment in the U.S. hospitality industry.
U.S. hotel sales rose to $28 billion last year, which was a 42-percent increase from 2012 and the strongest hospitality investment sales volume since 2007’s $42.9 billion, according to preliminary CoStar year-end sales data.
According to Lodging Econometrics, the U.S. lodging industry received an estimated total investment of US$21.8 billion in 2013, the highest level since 2009. New Lodging Econometrics data show the following:
- 1,171 hotels were sold or transferred in 2013, a decrease of 19 percent year-over-year. Previously, total and property transfers had peaked at 3,218 hotels/441,613 guestrooms in 2007, then fell to a bottom of 528 hotels/60,804 guestrooms in 2009, a decrease of 84 percent by hotels. After rebounding a bit in 2010 to 1,358 hotels, transaction volume has since been locked in a bottoming formation with little M&A activity.
- Of the 1,171 property transfers last year, 775 were individual single asset transactions, which increased 18 percent year-on-year. Another 395 were portfolio transactions, which decreased 49 percent year-on-year. M&A property transfers were of no significance in either 2012 or 2013.
- In 2013, 898 hotels had a selling price reported into the public domain. For those hotels, the average selling price per room was US$132,955, an increase of 18 percent year-on-year and the highest ever recorded. Prices soared because of low cap rates, improved profitability, a greater availability of lending and because of a larger number of upscale hotels in the sales mix.
- For hotel transactions with a reported selling price, activity totaled US$16.8 billion in 2013. Privately held equity funds and hotel companies accounted for 62 percent of sell side activity with a combined US$10.4 billion. On balance, they were net sellers within their respective portfolios as they implemented exit strategies for assets acquired or developed earlier. Publicly traded REITs followed with 18 percent of the sales activity equaling US$3 billion.
- On the buy side, publicly traded REITs were net purchasers of lodging real estate and accounted for 30 percent of buying activity with US$5 billion recorded. Privately held equity funds with US$4.5 billion and hotel companies with US$2.5 billion were also heavy buyers accounting for 27% and 15 percent of buying activity respectively.
Robust demand, improving room rental performance and a massive supply of capital from REITs and private equity sources are expected to provide the basis for another year of strong investment in hotel properties in 2014.
An abundance of equity and debt capital should drive a 5 percent to 10 percent increase in global hotel transaction volumes in 2014, according to Jones Lang LaSalle.
Lodging Econometrics said investors see greater opportunity over the next few years. Steady economic growth should bring increases in guestroom demand and greater pricing opportunity. Since the construction pipeline will not produce new supply additions of significance until later in the decade, profitability should continue to improve.
Source : Hotel Management