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Hotels Survey Finds Investors' Soft Spots

CHICAGO-Researchers conclude more investors are leaning toward luxury and upscale hotel purchases for 2008. When 2007 ends, this year's US sales volume will top $45 billion.

By Gina Kenny | Updated on December 13, 2007

CHICAGO-A Jones Lang LaSalle Hotels survey due to be released later this month shows that investors plan to gravitate toward acquiring more luxury and upscale hotels in the upcoming year. The 15th edition of the Hotel Investor Sentiment Survey was sent to 6,000 investors globally.

Poised to release the survey in mid-December, Kristina Paider, senior vice president of research and marketing for locally based Jones Lang LaSalle Hotels, says there is expected to be $45 billion in US hotel transactions by year’s end, a 27% increase from last year’s $35.3 billion. The increase is largely due to nine “mega-deal” portfolio transactions, which accounted for a total of $23 billion of the transactions, she says. Mega-deal transactions included the Lightstone Group acquiring Extended Stay America for $8 billion; Morgan Stanley acquiring eight properties in the Luxury CNL portfolio for $4 billion; and Ashford Hospitality acquiring the CNL hotel portfolio for $2.4 billion. One of the largest transactions in the Americas was the acquisition of the Makena Resort by Morgan Stanley Real Estate Fund V US and the Dowling Co. Inc. for $575 million.

“We are forecasting the mega deals will slow down considerably,” Paider says. Part of the reason for the decrease is the current instability of the debt market. “In order to close large mega deals, sponsors will need considerably more equity [and] high quality assets,” she says. In 2008, hotel transaction activity is expected to be between $25 billion and $30 billion, Paider tells GlobeSt.com.

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