NEW YORK CITY—If you haven't already noticed, 2014 is—and will continue to be—a red-hot year for Manhattan hotels. That's among the findings in a new report from JLL, which also forecasts healthy demand but overall slow revenue growth. For 2013, the report found a dip in the number of trades made but saw an overall increase in the size of those transactions.
“Investment volume is expected to increase to $2.7 to $2.8 billion in 2014—significantly above 2013 levels—due to continued liquidity among Manhattan hotels as well as the increase in available product. Hotel demand is at an all-time high; however, RevPAR growth will be more tepid this year due to 6,400 additional rooms slated to enter the market.”
Continuing to look ahead, the report says, “Over 6,400 hotel rooms will be added to the Manhattan market in 2014, increasing the market's room inventory by 8%. With close to 15,000 rooms slated to enter the market between 2014 and 2016, Manhattan has more room under construction than any other US city.”
A couple of factors contributed to something of a slowdown in 2013, the report asserts. Hotel transaction volume declined from 2012 levels by 25%, due primarily to the lack of quality product listed during the first half of the year. Also at play was a delay in the closing of multiple large transactions.
Despite the decrease in transaction volume in 2013, the average transaction size was $153 million; nearly 20% above the average deal size of $131 million in 2012. Also, the average price per key of $726,300 was 30% higher when compared to that of the previous year. In addition, the average sales price was considerably higher than the average price per square foot of $775 in 2012.
The report covers hotel financing as well. Capital is pouring into the sector—thanks to the influx of CMBS debt into hotel development—and the pool of lenders is broadening. JLL sees a bright future for the capital markets, the report notes. “We anticipate the debt markets to continue to improve as more groups enter the market and drive greater."
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Rayna Katz
Rayna Katz is a seasoned business journalist whose extensive experience includes coverage of the lodging sector, travel and the culinary space. She was most recently content director for a business-to-business publisher, overseeing four publications. While at Meeting News, a travel trade publication, she received a Best Reporting award for a story on meeting cancellations in New Orleans during Hurricane Katrina.
