As stay-home orders gripped the globe and travel ground to a halt, buying and selling hotels became "effectively a frozen marketplace," according to a new analysis.
April saw eight US hotels sold for $2.5 million or greater, wrote Jim Costello, a senior vice president of Real Capital Analytics.
"We have never seen this level of illiquidity in the hotel market," Costello wrote.
Volume for the month reached only $42 million, compared with roughly more than $1 billion in March and about $1.75 billion for February. The falling figures for February and March marked a downward trend for the hotel sector already in progress before the COVID-19 pandemic, according to RCA.
"A construction glut in key markets and challenges from upstarts such as Airbnb had put the sector under pressure," Costello wrote.
What sold last month mostly were smaller units. Six properties had fewer than 100 rooms; only one was described by RCA as full service.
The market for hotels previously cratered during the Great Recession. This time around, however, the bottom is far lower, according to RCA. April 2009 saw 21 hotel transactions for a volume of $127 million, a low point that arrived after months of reduced trading.
"The current downturn is more striking because of the speed by which the market got there," Costello wrote.
When the purchase market will thaw is anyone's guess, but lenders continue to refinance hotel properties.
"Buyers and sellers are simply too far apart on their expectations of value and the market will remain frozen until both sides move," Costello wrote.
The coronavirus shutdown caused significant pain to the travel industry. California alone lost half a million travel sector jobs so far and could lose $54.5 billion in travel spending by the end of the year.
Research firm Trepp identified lodging as one of three property types whose valuations are likely to be most influenced by COVID-19.
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Thomas Phillips
Thomas Phillips is part of the social media team at ALM Media.
