The 2010 Rebound of US Lodging Industry Transactions

NEW YORK CITY-The past quarter clearly revealed that investment in US lodging assets present a compelling opportunity to capitalize on what many believe will be a continued rebound of the sector.  Despite a tepid recovery in the broader economy, investors perceive that current positive RevPAR growth, along with the ongoing strengthening in average rates, which when coupled with relatively low supply growth, will sustain the industry’s cyclical rebound. While scores of legacy lodging investments continue to struggle financially under the weight of over leveraging based upon today’s valuations, many assets are still enormously valuable.  This fact is not lost on sophisticated lodging investors who are eager to capitalize on the mistakes of others. The heightened liquidity of established and newly formed public hotel centric investment entities, flush with low cost capital, has fueled the recent burst of transaction activity.   This phenomenon has allowed private entities to exit investments made earlier in the decade and even monetize some gains at pricing near recent peak levels.   Finally, the thaw in all types of hospitality lending is spreading, including a glimmer of construction financing for financially feasible deals that include real substantial equity invested behind debt. 

The CB Richard Ellis (CBRE) Valuation & Advisory Services Hospitality & Gaming Group continuously monitors the major US hotel sale transaction market.  The CBRE Q3 2010 Major U.S. Hotel Sales Survey includes 67 single asset sale transactions over $10 million each that are not part of a portfolio allocation.  These transactions totaled more than $3.5 billion, and include 18,900 hotel rooms with an average sale price per room of $185,000. In comparison, through Q3 2009 only 21 major US hotel sales transacted for a total of more than $1.6 billion, illustrating that trade activity continues to outperform on a quarter-over quarter, and year-over-year basis.