U.S. lodging fundamentals are currently the most robust I’ve experienced during my 35-year career. Rarely has there been a point in time when the stars are aligned and the market is generally favorable to buy, sell, and develop hotels in the U.S.
A growing, albeit modest, U.S. economy, emerging domestic energy markets, declining gasoline prices, and strengthening consumer confidence represent positive underpinnings for the lodging industry. Developing middle classes throughout the globe are creating new travelers that want to explore and see the world, with particular interest in the U.S.
Additionally, foreigners perceive the U.S. as the gold standard destination for investing and preserving capital. Group demand and travel has rebounded past prior peak levels and relatively limited construction financing for new hotel development, has positioned the industry to achieve occupancy levels not seen for 30 years.
Since the economic outlook for the United States calls for several more years of steady, sustainable growth fueled in part by net job growth and modest increases in GDP, hotel property transactions and pricing are expected to continue on their present upward trend. Record sums are being routinely paid in many US metropolitan areas for desirable lodging assets driven in some measure by epically low interest rates that have prevailed since the mid 2000’s. Enormous investment demand from private and institutional capital from throughout the globe is targeting hotel properties on both coasts as well as major cities within the nation’s interior.
While transaction volume and pricing levels are setting new records, the current mature growth phase of the cycle has yet to reach peak levels. During the past several years, prudent investors have refinanced assets and many astute owners are now implementing exit strategies and disposing of appreciated assets. For some, now is an excellent time to take advantage of the highest hotel sale prices seen in history, and cash in before interest rates, supply changes, and/or an event/shock have a meaningful negative impact on pricing. For me, a bird in the hand is worth two in the bush.