JLLH ups U.S. hotel transaction volume forecast by 44%

UNITED STATES Jones Lang LaSalle Hotels has upgraded its 2010 U.S. hotel transaction forecast, increasing its volume projection from US$4.5 billion to US$6.5 billion.

Year-to-date, hotel deal volume has notched to US$4.7 billion, outpacing the original forecast by US$200 million, JLLH says. Deal pace has accelerated significantly throughout the year, and with a limited supply of high-quality hotel investment product on the market, the bidding environment has become highly competitive.

Transaction volumes totaled US$814 million in the first quarter of 2010, increasing to US$1.5 billion in the second quarter and jumping to US$2.2 billion in the third quarter. In September alone, more than US$1.1 billion in transaction activity closed.

“Investment capital has continued to be attracted to lodging investments, resulting in increased transaction volumes during each of the first three quarters of 2010, driven by the recovery in operating fundaments,” says Arthur Adler, Americas CEO of Jones Lang LaSalle Hotels. “Transaction momentum is expected to continue as increased valuations result in more owners testing the property sale market.”

Hotel REITs have been the most acquisitive buyer group by a wide margin as a result of their wide trading multiples, accounting for 58% of hotel purchases to date, according to the firm’s proprietary transactions database. Eight of the 10 largest single-asset transactions have been purchased by REITs, most of which have been funded by all cash.

“There is a substantial amount of equity in the marketplace waiting to be invested in hotel real estate,” Adler says. “Additionally, debt liquidity for both for acquisitions and refinancings is slowly increasing. These market dynamics will lead to further increases in transaction activity by year-end.”