US Hotel Sales Increase 68% to More Than $35B

CHICAGO-US hotel sales for 2006 were $35.3 billion, an increase of 68% from $21 billion in 2005, according to a recent report on national hotel investment by Jones Lang LaSalle Hotels. The company tracked all hotel sales of $10 million and higher. Last year was the third year in a row of “record transaction volume for the hotel industry,” says Kristina Paider, senior vice president of research for Jones Lang LaSalle Hotels. The largest hotel transaction was the sale of the Four Seasons Hualalai for $502 million, she says.

The increase in sales is due to both an increase in the number of hotel sale transactions and an increase in the sales price. The growth is due to many factors, including high and increasing operating returns, more and diversified buyers, an increased ability to obtain financing and a limited amount of newly constructed hotels, according to the report. “Many choose to buy and renovate over building because of those high [construction] costs,” she says.

There is a greater “transparency” regarding hotels’ operating results, which allows investors, who may not have a lot of experience with buying and managing hotels, to enter the market, according to the report. “Hotels are seen as becoming more of a mainstream asset class,” Paider says. More hotels are also entering the marketplace as some of the publicly held companies involved in hotel real estate are selling the hotel buildings but continuing to operate the hotel. “They are moving to an owner-operator structure,” she says.