Identify the right buying opportunities

Identify the right buying opportunities

Sure, buying hotel real estate during the trough is critical, but it is equally critical to buy the RIGHT hotel assets. There is always demand for the right assets and pricing premiums surge in relative terms as markets strengthen. So what are your thoughts ? what defines the RIGHT assets?

Have values bottomed? They certainly should have as the bounce off the bottom in fundamentals at the full-service and luxury end of the market is clearly established. In fact, that improvement has accelerated as most experts were expecting RevPAR declines this year as recently as four to six months ago, and they are now expecting solid gains this calendar year. Yes, there is probably still more capital chasing fewer buying opportunities but I am not sure I would expect that to change ? especially for the best hotel assets.

One only needs to look at the number of new equity sources and debt providers coalescing around the hotel sector to understand the attraction of placing capital in a real estate sector that has hit bottom from an net operating income (NOI) perspective. The influx of liquidity to other real estate asset classes is notably less robust because related NOI will take years to bottom. Read this item on hotel sales performance to get even greater insight:
So while recovery will be tied to the economy and may be slower than expected, the hotel sector will enjoy disproportionate liquidity for some time.

However, the real trick has always been identifying and acquiring the best assets ? those for which there is virtually always liquidity. These assets tend to be in gateway markets and in the best locations ? and they tend to be 4-star or better. There seems to always be a shortage of this product, and that shortage and values really spike as the cycle peaks. They are most attractive to high net worth investors, international capital sources and to institutional capital sources that often arise as the market is peaking.

I would be interested in your thoughts. What are these key gateway markets and what seems to define these highly liquid assets?