Lodging Econometrics has compiled a look at the major US hotel sales in Q3 of 2018 (July through September). This includes 57 single-asset sale transactions totaling about $6.4 billion. New York had the most transactions in Q3, followed by Florida and California. The largest deal on this list was a 186-key Hyatt Place in Manhattan.
Despite the challenges of the lingering pandemic, hotel transactions have been brisk over the past few quarters. According to the Q3 2018 Major US Hotel Sales Survey by LW Hospitality Advisors, 57 single-asset hotel deals traded during the third quarter, totaling over $6.4 billion.
Florida was the most active state, with sixteen trades or about 18% of the national Q3 total. New York followed with eight, and California was close behind with seven.
Hotels are trading at high prices because investors have begun to look past the low occupancy rates and below-average generated income that remain below pre-pandemic levels. They are also pricing in a favorable financing backdrop as capital continues to flow into the industry and spreads continue to compress.
While YOY percentage sales growth is often the most useful indicator of an operating company's strength, it isn't always accurate. YOY earnings per share are a more relevant metric for evaluating a company's financial health.
The New York market continues to lead the nation in hotel sales transactions. The number of trades rose a whopping 120 percent year-over-year in Q3 2021, according to the LW Hospitality Advisors Q3 Select Major US Hotel Sales Survey.
Despite slowing demand and a rising interest rate environment, hotels remain an attractive property type to investors. Increases in occupancy, average daily rate, and revenue per available room ("RevPAR") continue to accelerate across Manhattan during the second half of 2022.
Three of the top twenty commercial real estate sales in New York in Q3 were focused on hotels. The largest was Aju Hotels & Resorts' $86 million purchase of the 186-key Hyatt Place New York/Midtown South hotel at 52 West 36th Street and another Hyatt-branded asset at 30 West 31st Street.
The number of major US hotel sales slowed in Q3, though there were still some big deals in California. According to an Irvine-based company that tracks the market, the state recorded a record-breaking 2021 for hotel deals.
The most expensive statewide hotel sale was the $265 million Montage Healdsburg. Other top-tier hotel sales included the 59-room Alila Ventana Inn & Spa in Big Sur at $148 million and the 215-room Hyatt Regency Los Angeles Airport at $75 million, Atlas Hospitality Group reports.
There were also a lot of private equity-led conversions, such as those through Project Homekey. These projects are taking a lot of hotel inventory off the market in the midscale and economy segments, Reay said.
Investors are looking at hotels because they see cap rates, the rate of return on a property based on rental income and other factors, going higher, Reay said. And there is a lot of capital out there waiting to be put into the real estate market.
Hotel sales in the third quarter of 2022 topped $14.4 billion, with 90 single asset sale transactions over $10 million. This was a record high, with sales price per room dropping by roughly 15 percent from Q3 2020.
The hotel industry is thriving, with occupancy rates and ADRs up and RevPARs averaging more than 2019 levels. However, the industry is facing several challenges that will limit the growth of hotels over the long term.
The global economic slowdown, coupled with the ongoing migrant workforce migration into higher-paying jobs, will further tighten labor markets and wage rates. These issues will impact hotel performance, putting downward pressure on profitability.