Forecast: Hotel Transactions To Increase by 67%

SAN DIEGO-Far harsher than most investors anticipated, 2009 was the year of a new reality. As debt markets remained illiquid and fundamentals continued to deteriorate, many investors retreated to the sidelines. Americas hotel transaction volumes sunk 78%, totaling $2.1 billion—the lowest level of the decade, according to data from Jones Lang LaSalle.

The Americas region will face another challenging year for hotel transactions in 2010 as the market remains hampered by limited debt liquidity, says JLL. Nonetheless, deal volumes are expected to rise to at least $3.5 billion, according to JLL Hotels’ Hotel Investment Outlook report, which premiered at the Americas Lodging Investment Summit in San Diego. The increase in transaction volume will be driven by the bottoming-out of RevPAR, the significant amount of equity entering the market and increased pressure on some owners and lenders to sell or recapitalize assets. These factors will result in the narrowing of the bid-ask spread and an increase in seller financed deals.

“This increase will mark the first rise in two years, but is still approximately 40% below the annual volumes recorded from 2000 to 2003,” says Arthur Adler, managing director and CEO-Americas for Jones Lang LaSalle Hotels. “To the extent that several portfolio transactions are completed, transaction volume will exceed the $3.5 billion level.”