The U.S. hotel sector is on track to reach $25 billion in transaction volumes this year, according to Jones Lang LaSalle (JLL).
One of the contributing factors is an abundance of equity capital, led by private equity and REITs, and also a diverse array of other investor types. Strong debt markets, including the re-emergence of the floating rate CMBS market, rising revenue per available room, and the resurgence of the resort sector, also contribute to this number.
“With $8.3 billion already tallied in hotel transactions in the U.S., 2014 is on track to contribute to the hotel sector’s momentum,” says Arthur Adler, Americas CEO and managing director of JLL’s Hotels & Hospitality group. “There is plenty of available capital chasing assets ranging from high-profile full-service hotels to select service portfolios to resorts in markets across the spectrum.”
Private equity accounts for one-third of transactions so far this year, with primary targets including large select service portfolios, luxury resorts, and big-ticket full-service hotels.
The purchasing volume in REITS is anticipated to reach $5 billion this year. REITs target high-quality, branded assets in primary markets. Rounding out the top three buyer types is foreign capital. Offshore investors are expected to account for a projected $3 billion in transactions in 2014. Asian investors were the most active in 2013, and for 2014 buyers from the Middle East are in the lead.
The average price per room of trades during the first five months of the year is up 15 percent from the same prior-year period, driven by continued RevPAR increases. This year marks the fifth consecutive year of RevPAR growth since the downturn, and the momentum shows no signs of slowing.
