Benefitting from unprecedented growth in 2013—and even faster overall economic growth anticipated this year—the hotel sector can bet on gaining still more guests and higher revenues this year, so says HREC Investment Advisors' Geoffrey E. Davis, in an article on GlobeSt.com.
He refers to the findings in two new reports: Lodging Econometrics’ fourth quarter US hotel transactions summary and Marcus & Millichap’s hospitality research quarterly update.
Says the former: the lodging industry reached an estimated total investment of 21.8 billion in 2013, marking its highest level since 2009. Better, it is expected to accelerate higher in 2014 and subsequent years.
For 2013, 1,171 hotels were sold or transferred, a decrease of 19 percent year-over-year, the report states. Previously, total transactions and property transfers peaked at 3,218 hotels—or 441,613 rooms—in 2007, then precipitously fell to a bottom of 528 hotels/ 60,804 rooms in 2009, a decrease of 84 percent.
Of the 1,171 property transfers last year, 775 were individual single asset transactions, which increased 18% year-over-year. Another 395 were portfolio transactions, which decreased 49 percent YOY. Merger and acquisition property transfers were of no significance in either 2012 or 2013, according to LE.
For hotel transactions with a reported selling price, activity totaled $16.8 billion in 2013. Private equity funds and hotel companies accounted for 62 percent of sell-side activity. Publicly Traded REITs followed suit with 18 percent of the sales activity.
Steady economic growth should bring increases in guest room demand and greater pricing opportunity, the firm predicts. Further, the construction pipeline won’t produce new supply additions of significance until later in the decade so profitability should continue to improve. Also expected is an increase in portfolio and M&A volume as Wall Street becomes reenergized and the lodging industry begins to consolidate.