The average selling price per room was $70,308, which the report says demonstrates a 16% increase off the cyclical bottom established in 2002. Furthermore, when all transactions were accounted for--including merger and portfolio acquisition activity--850 hotels with nearly 120,000 rooms changed hands having a total value of a record high $8.5 billion.

"It was a banner year for transactions," says Patrick Ford, president of LE. "There were 573 fee-simple transactions in 2003--just 14 fewer than the high of 587 set in '02, but the average hotel size, at 139 rooms, and total sales proceeds, at $5.6 billion, set records."

The report attributes these results to an unusually large number of individual transactions greater than $10 million each. LE reports that in 2003, 133 hotels were sold for at least $10 million each, compared to 76 the year before. "Opportunity funds and equity groups purchased properties that had faltered during the travel downturn and were being pruned from investor portfolios," points out Ford. "Many had strong locations, were in need of reinvestment for renovation and repositioning, and were ultimately reflagged to stronger brands in order to take advantage of an economy on the upswing. He predicts that history will show this to have been a period of great opportunity to acquire these assets.

The average size of all properties sold increased to 139 rooms in 2003 from 116 rooms in 2002. And 163 hotels larger than 150 rooms changed hands in 2003, up 45 hotels over 2002. Conversely, the number of transactions under 150 rooms fell by 59 hotels to 410.

Ford expects transaction volume to fall slightly in 2004. He anticipates that, barring extenuating circumstances, those who own lodging real estate today, are likely to continue to hold. "This is the 11th consecutive month of improved operating performance, and with a rapidly recovering economy, owners are likely to postpone selling and take real estate profits at a later time." He adds that this is particularly true for high-end assets which, more than ever before, are held by public companies who are traditionally longer-term holders.

In the smaller-sized market, transaction activity, although fluctuating, is still relatively brisk. This is largely because capital is generally available for smaller transactions and there are more investors looking for smaller-sized properties. Ford expects transaction volume for smaller properties to remain at high levels.

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