Investors Turn to Smaller Hotel Markets

Orlando, where Marcus & Millichap recently brokered the sale of this Clarion Hotel property, is among the markets that have experienced occupancy declines.

CALABASAS, CA—Notwithstanding potential headwinds, the outlook for the hotel sector remains positive amid improving metrics for occupancy and revenues, says Marcus & Millichap. Hotel room demand persists. In the year that ended June 30, investment sales velocity rose about 10% percent nationwide as demand picked up for properties in many of the country’s smaller markets. Even so, the price per key was down slightly on a year-over-year basis. Marcus & Millcihap outs it at slightly less than $100,000, attributing the drop to fewer properties changing hands in upper chain scales.

Conversely, the firm’s latest report on the lodging sector says properties in the lower-tier chain scales drew significant investor interest. “Trades increased considerably for economy and upper midscale assets during the previous four quarters,” according to the report. “Demand for upscale assets held steady with the majority of trades in Marriott and Hilton branded properties.”