An interesting dynamic has been evolving within the US hotel business as, against a backdrop of sagging consumer confidence, economic turmoil and a restricted debt market, sector operating metrics have been improving. The strong rebound of demand for transient lodging accommodations that started in 2010 has endured throughout this past year. Barring any sudden economic or geopolitical shocks, US lodging fundamentals are expected to continue to improve due to the phenomenon of rising demand coupled with limited new hotel supply. In addition to the recovery of corporate and group meeting demand, inbound international travel has particularly benefited hotels situated in gateway US cities. With this said, the US economy overall is suffering from tepid growth and high unemployment, issues that will challenge the economy and therefore the lodging business, including the hotel transaction market, during the foreseeable future.

Broader economies and markets experience cyclical behavior. It is not a question that our economy will vigorously expand again; the question is when. Similar to past market nadirs, this is the best time to deploy capital into hotel value enhancement opportunities. With the world awash with liquidity, many types of investors have raised capital and are actively seeking US hotel investments. Examples include: high net worth individuals and family offices, private equity groups, pension and hedge funds, insurance companies and public hotel ownership entities. Investment in and/or acquisition of US real estate, including lodging assets, is appealing to foreign investors throughout the world including: France, Germany, Spain, Israel, Russia and China. Superior risk-adjusted returns, diversification, inflation hedge, capital appreciation and perceived relative security and stability are among the alluring attributes that attract overseas investment in American commercial property, including hotels. While both US coasts continue to be of heightened interest, secondary and particularly tertiary markets, with the exception of portfolio transactions, have struggled to gain attention despite compelling opportunities in many such areas.

We continuously monitor the major US hotel sale transaction market. The LWHA 2011 Major US Hotel Sales Survey illustrated below includes 130 single-asset sale transactions over $10 million each that are not part of a portfolio allocation. These transactions totaled roughly $8.9 billion and include roughly 41,000 hotel rooms with an average sale price per room of approximately $217,000. By comparison, our 2010 survey identified 84 transactions totaling more than $5 billion including 24,000 hotel rooms with an average sale price per room of $200,000. US hotel transaction activity has clearly gained traction since 2009 during which 36 hotels that included 18,600 rooms traded for a total of only $2.3 billion or an average sale price per room of $193,000.