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Hotel Sales Drop in 2008; Expect More of the Same

In last year's first three quarters, hotel transaction volume fell by more than 67% nationwide. The first half of 2009 looks similar.

By Maria Wood | Updated on January 22, 2009

Between quarters one through three of 2008, hotel transaction volume fell by more than 67% nationwide, according to Hotel Brokers International, a brokerage network with more than 30 offices in the US. Deals done specifically by its member brokers also declined, but at a lesser rate than the industry as whole, partly attributable to the fact that the majority of hotels transacted by its organization are mid-market properties, which are more easily financed.

Between January and August of ’08, Kansas City, MO-based HBI tracked 216 public transactions versus 582 in the same period a year earlier. Furthermore, the average deal size slipped from 199 rooms to 167, while the average price per room dropped to $108,000 from $120,000. Total volume tallied for the first three quarters reached $6.4 billion compared to $17.4 billion.

At the same time, HBI members recorded 57 deals compared to 118 for the first three quarters of 2007. Cap rates for those deals inched down to 8.67% from 9.17%, which is statistically insignificant. However, loan amounts have changed. First mortgage LTV came in most recently at 71% with a 7.2% average first-year interest rate. In the prior three-quarter period, the LTV was 74.5% with a first-year interest rate of 8%.

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