UNITED STATES Hotel transaction volume in the United States reached US$4.9 billion through May—triple the volume recorded during the first five months of 2010. Just as importantly, the number of hotel investors indicating intent to buy over the next six months is at its highest level in six years.
Single-asset hotel transactions dominated the U.S. landscape in the first five months of the year, accounting for 85% of deal volume, according to Jones Lang LaSalle Hotels data. High-quality assets with in-place cash flow located in key urban markets have made up the bulk of the hotel trades tracked thus far in 2011.
“We are seeing a striking turnaround in the market for hotel transactions,” says Arthur Adler, managing director and CEO-Americas for Jones Lang LaSalle Hotels. “Building on improving lodging fundamentals which gained strength last year, the volume of capital flowing to hotel real estate has ignited as acquisitive investors reentered the market in full force, leading to a 170% increase in transaction levels.”
REITs continue to make headlines and accounted for 61% of single-asset transaction volume, followed by private-equity investors—the second most acquisitive group—representing 25% of purchases by volume.
“Values are improving across all metrics,” says Robert Webster, a managing director for Jones Lang LaSalle Hotels. “The average single-asset transaction size jumped to US$84 million during the first five months of 2011, doubling on the prior-year period. The average price per key of single assets that transacted during the period increased 27% to top US$234,000.”
Meanwhile, Jones Lang LaSalle Hotels’ latest Hotel Investor Sentiment Survey reveals that investors’ “buy” sentiment is at a six-year high, with 59% of respondents indicating that their primary investment intention over the next six months is to acquire assets. Of the 92 lodging markets tracked by the survey, the 10 cities garnering the highest interest for acquisitions are all located in the Americas. The survey is directed toward the world’s 6,000 leading hotel investors and owners.
“Based on the pace recorded thus far in 2011, we are confident that transaction volume forecast of US$13 billion for full-year 2011 will be met or exceeded as momentum in the market further accelerates,” Adler says.