10 places to buy, sell hotels in the U.S.

Although deal volume for United States hotels was down to $7.5 billion in the third quarter (a 21 percent decrease from the second quarter), hotels are still trading at a healthy pace 2.5 percent higher than a year ago, according to data from Ten-X Commercial.

The decline in hotel transactions was felt most in the full-service segment, according to Ten X’s "Quarterly Hotel Monitor." In that sector, deal volume fell more than 27 percent to $4.7 billion during the quarter. Meanwhile, limited-service transaction totals fell 7.7 percent to $2.8 billion over the previous quarter. However, volume in both segments is above levels seen a year ago.

Related Story: 3 things to know about U.S. hotel transactions in Q3

Price per room also is falling, according to the data. During the third quarter, it fell 4.1 percent to just north of $160,000 per key. That figure is still 26 percent higher than a year ago, however. The limited-service segment saw a price-per-key increase during the third quarter of 5.6 percent to $95,000. Full-service hotels did not fare as well, with price-per-room falling 13 percent to $235,000 during the quarter. Pricing for the segment is 11.5 percent above what it was a year ago.

With all of that data at the forefront, Ten-X highlighted the top five buy and top five sell markets in the U.S.

Where to Buy

Florida’s weather isn’t the only thing heating up and Ten-X called out three markets in the state as places investors should buy hotels. Here’s why:

1. Miami

The market’s economy is booming, with the number of jobs up 4.4 percent year over year and up 12.5 percent from the previous cycle peak, although researchers noted this is inflated by hurricane-depressed figures in 2017. Even so, metro jobs are expected to see 1.4 percent annual gains through 2022. By 2022, average daily rate is forecast to increase 17.2 percent to $227.08 and revenue per available room is expected to jump 23.2 percent to $183.28. Ten-X noted that Miami would be more resilient than average in the event of a downturn.

2. Palm Beach, Fla.

ADR in the market is expected to increase 9.1 percent to $190 by 2022. Over the same period, RevPAR is set to see an 11.8 percent gain to $145.78. Although researchers noted that Palm Beach experienced its lowest population gain since 2010 of 1.2 percent in 2017, that increase was nearly double the rate of the overall U.S.

Related Story: U.S. occupancy falls during third quarter, but what does it mean?

3. San Antonio

Metro employment in the market is up 1 percent year over year, but it is up 21.7 percent from its previous cycle peak. ADR is forecast to rise 7.2 percent to $120.10 by 2022. RevPAR will increase 10 percent to $81 over the same time period.

4. Raleigh-Durham, N.C.

ADR is set to increase 4.1 percent to $110.29 by 2022, with RevPAR growing 3.4 percent to $75.34. Unemployment in the market is low at 2.8 percent, trending below the U.S. national average of 3.7 percent.

5. Tampa, Fla.

Metro jobs will experience 1.9 percent annual gains through 2022, rising each year except for a decline in 2020. Should a downturn happen, Tampa would prove to be more resilient than average. ADR will grow 6.3 percent to $136.47 by 2022, and RevPAR will increase 11.4 percent to $104.01.

Where to Sell

The West Coast lights up the map for where Ten-X researchers say hoteliers should considering selling their properties.

1. Houston

The city’s fortunes ebb and flow thanks to a shaky energy sector, although unemployment stands at 3.9 percent and population has grown 1.4 percent. Performance has been trending downward of late, but ADR is expected to grow 2.1 percent by 2022. RevPAR is forecast to grow 1.8 percent over the same time period.

2. San Jose, Calif.

Performance forecasts don’t look too sunny for San Jose, with ADR (-12.1 percent) and RevPAR (-18.3 percent) both falling double digits by 2022. Researchers noted that this market would be considerably less resilient than average during a downturn.

Related Story: What to know about opportunity zones created by recent tax reform

3. Las Vegas

Although the market has strong long-term growth prospects due to excellent demographic trends and a rising population, hotel performance has been lackluster. That trend is expected to continue through 2022, with ADR falling 0.8 percent and RevPAR declining 3.3 percent.

4. Baltimore

Unemployment for the market has been trending above the national average at 4.1 percent. Although population grew 0.3 percent last year and in line with previous years, that figure is less than half the U.S. rate. By 2022, ADR is set to grow 2.1 percent, but RevPAR will decrease 0.3 percent.

5. Milwaukee

Ten-X found that the market has weak long-term growth prospects because of flat population growth. While ADR is expected to rise 3.5 percent by 2022, RevPAR is forecast to decrease 3.5 percent.