U.S. Hotel Transaction Volume Reaches $5.1B So Far in 2012
- Jun 06, 2012
Jones Lang LaSalle’s hotels group has found that 2012 is shaping up to be a good year for the U.S. hospitality sector, with $5.1 billion of transaction volume moving so far this year — the second-highest volume in the past four years. The data excludes note sales, recapitalizations and foreclosures, as well as the previously announced $1.9 billion Motel 6 transaction that has not closed yet.
The volume of capital flowing to hotel real estate remains high as acquisitive investors enthusiastically seek opportunities to buy hotels, said Arthur Adler, Americas CEO of Jones Lang LaSalle Hotels. The average single-asset transaction size reached $40 million during the first five months of 2012, representing a slight increase over the average deal tracked between 2006 and 2011. Underpinning investor confidence is the continued strength in hotel operating fundamentals, which are solid across all metrics. On a national basis, hotel revenue per available room has maintained the strong growth rate posted in 2011.
The Blackstone deal will certainly do much to push transactions during the remainder of the year, as the private-equity firm spent $1.9 billion to purchase 1,202 Motel 6 locations two weeks ago from Accor SA. But that wasn’t the only major purchase of late; in early May, a consortium of investors led by Oaktree Capital Management spent $200 million to acquire the iconic Fairmont San Francisco, and, in late March, Inland American Lodging Group Inc. added five upscale hotels in five states to its portfolio for $393 million.
Part of the increased interest from the investor side may be due to revenue growth. According to consulting firm PKF Hospitality Research, 80.5 percent of the properties it surveyed saw an increase in total revenue during 2011, while 72.3 percent saw profit growth.
According to the JLL report, the first five months of 2012 represent the second highest start to a year since 2008, only exceeded by the first five months of 2011 when REITs dominated purchases of $100-plus million prime urban assets. During that same period of time in 2011, total transaction volume was $6.4 billion. The average price per key for single assets that traded year-to-date 2012 topped $194,000, 5 percent above the full-year 2011 level. This level far exceeds the average price per key recorded over the past several years, and emphasizes the strength of hotel fundamentals and high level of investor interest.
Private equity investors have become the most active hotel buyers, representing a shift from the first five months of 2011, Private equity investors continue to make headlines and account for 52 percent of transaction volume, followed by REITs, as the second most acquisitive group, representing 25 percent of purchases by volume. REITs remain active bidders for a number of hotel transactions, and are expected to be increasingly active in the market in 2012, Adler said.
Based on the pace recorded thus far in 2012, the firm remains confident that the transaction volume forecast of up to $15 billion for full-year 2012 will be met as momentum in the market further accelerates, concluded Adler.