Today's global travel sector, which many characterize as being "on the brink of collapse," is simply unprecedented.  Seven months into a 100-year worldwide pandemic which caused a swift, wide, and deep economic recession has decimated key travel and leisure related industries including airlines, car rentals, cruise lines, ridesharing, and tour operators.  While stock markets have rebounded to near record levels, the US lodging industry continues to experience crippling stress as travel demand, which has experienced a sharp and sustained decline, continues to significantly lag pre-pandemic levels.  Although most segments of lodging demand came to an abrupt halt during the COVID-19 crisis, hotels located in urban markets, particularly group and meeting/convention-oriented properties, have been most negatively impacted and will likely take the longest period to recover.

The LW Hospitality Advisors (LWHA) Q3 2020 Major U.S. Hotel Sales Survey includes 12 single asset sale transactions over $10 million, none of which are part of a portfolio. These transactions totaled $829 million and included approximately 2,700 hotel rooms with an average sale price per room of $306,000. By comparison, the LWHA Q3 2019 Major U.S. Hotel Sales Survey identified 40 transactions totaling roughly $3.725 billion including 13,100 hotel rooms with an average sale price per room of nearly $283,000.  Comparing Q3 2020 with Q3 2019, the number of trades decreased by approximately 70 percent while total dollar volume declined roughly 78 percent and sales price per room increased by roughly 8 percent. 

Noteworthy observations include:

• Three trades occurred in California and two sales transpired in the States of Arizona, Massachusetts, and New York.

• Five trades were consummated for $100 million or more each.

• Two trades transpired for greater than $700,000 per unit. 

The Q3 2020 Major U.S. Hotel Sales include:

• Acorn Development LLC, an Amazon subsidiary, acquired from Blackstone the 299 key Residence Inn by Marriott Arlington Pentagon City in Arlington, VA for $148.5 million or nearly $500,000 per unit.  Amazon plans to demolish the 24-year-old high rise hotel and incorporate the 1.5-acre site into their HQ2 PenPlace Development. In mid-2019, the seller, Blackstone, purchased the property for $99.1 million from Host Hotels & Resorts, Inc. (HST). The latest transaction represents an approximate 50% profit within one year for Blackstone.   The current trade is remarkable in that Amazon's HQ2 plans were widely known when HST sold the asset to Blackstone last year.

• Magna Hospitality Group purchased the 310 key Embassy Suites by Hilton New York Manhattan Times Square in New York, NY for a reported purchase price of $115.1 million or roughly $371,000 per unit.  The seller, Ashford Hospitality Trust Inc. (AHT), acquired the property in early 2019 for $195 million, representing a 41% decline in value during their 18-month hold.

• Xenia Hotels & Resorts, Inc. (XHR) announced the sale of the 221-room Residence Inn Boston Cambridge in Cambridge, Massachusetts for $107.5 million, or approximately $486,000 per key. The sale price represents a 11.6x multiple and a 7.8% capitalization rate on the hotel's 2019 Hotel EBITDA and net operating income, respectively.

• A planned auction of the Viceroy L'Ermitage Beverly Hills in Beverly Hills, CA was canceled after no buyer stepped up to bid more than the $100-million ($862,000 per unit) base price established by an unidentified "stalking horse" bidder.  The U.S. government seized the hotel in 2016 from a fugitive overseas financier who acquired the property for $46 million in 2010, reportedly with embezzled funds. The U.S. District Court for the Central District of California subsequently appointed a special master to facilitate a sale transaction.

• Xenia Hotels & Resorts, Inc. (XHR) announced the sale of the 275-room Napa Valley Marriott Hotel & Spa in Napa, CA for $100 million or roughly $365,000 per unit. Inland American Lodging Group, Inc., XHR's predecessor, previously acquired the asset in mid-2011 for $72 million.

• Apple Hospitality REIT, Inc. (APLE) acquired the new 105-room Hyatt House and 154-room Hyatt Place in Tempe, Arizona for $64.6 million, or approximately $249,000 per key. In 2018, APLE contracted with a joint venture that included Catellus & Mortenson Development to develop the hotels and secured the purchase price prior to the start of construction.

• A joint venture between BLVD Hospitality, Global Mutual, and ESI Ventures purchased from 4DS LP the 84 room Georgian Hotel in Santa Monica, CA for $62.5 million or nearly $745,000 per unit.  The iconic art deco boutique property which was built in 1933 and last sold in 1991, is commonly referred to as Santa Monica's "First Lady."

• A joint venture comprised of Highgate and Rockpoint Group sold to MCR the 168 room Royalton New York hotel for a reported $40.8 million, or $243,000 unit.  During the past decade, the property has sold twice, representing a decline in pricing on each occasion. The current seller had acquired the asset for $55 million in 2017 from FelCor Lodging Trust Inc., and who in turn had paid $88 million for the property in 2011.  Highgate, a dominant hotel investment and manager in gateway markets throughout the nation, and the largest hotel operator in New York City, has a terrific track record of success.  The current trade is intriguing in that it will be interesting to see what MCR does to reinvent the asset. 

• The 97-unit Gold Canyon Golf Resort and Spa in Gold Canyon, AZ sold for $29.43 million or $303,000 per key.  The 370-acre property situated roughly 40 miles east of Phoenix, AZ includes two 18-hole championship golf courses and 67 acres of developable land.

• Vinakom Communications purchased the 568 room DoubleTree by Hilton Bloomington Minneapolis South for $26 million or roughly $46,000 per unit.  During the past several years, the buyer has diversified its investments through the acquisition of hotels and office buildings. 

• The historic 57 room Kelley House Hotel in Edgartown, MA was acquired by private equity firm Blue Flag Partners for $19.64 million or nearly $345,000 per room.  The property, which is situated on the seasonal island of Martha's Vineyard, dates to 1742 and after more than 275 years is one of the five oldest hotels in the U.S.

• The Estate Cos., a South Florida based developer of luxury multi-family communities, purchased a five-acre site occupied by a 258-room former Ramada Hotel in Hialeah, FL for $15.25 million or $59,000 per unit.  The property last sold in 2014 for $13.5 million.

Human behavioral and consumer patterns have changed as many are not eager to enter closed environments with recirculated air, and no owner or hotel company has a playbook for what has been and looks like will continue to be a prolonged near shutdown of travel.