A steady flow of capital is expected to continue in the hotel real estate market in 2012 with increasing investor interest in select service transactions, according to Jones Lang LaSalle Hotels. Compared to 2011 activity, the firm forecasts that the 2012 volume of select service hotel portfolio sales is likely to double.
“The select service sector is the most agile and resilient of the hotel transaction market. Its demand has quadrupled in the last 15 years, giving way to growth in the product offering,” said Al Calhoun, managing director of Jones Lang LaSalle Hotels. “An increase in corporate demand at branded upscale select service hotels is expected to bolster the performance for the overall sector in 2012.”
Private equity and institutional investors will continue to play a significant role in the acquisition of select service assets. Investors are looking to expand their portfolios at a national and regional level, and branded portfolio sales are likely to fare better in the market in 2012. Turn-around hospitality assets in the today’s marketplace are also likely to face a wide buyer audience. However, buyers should remain cautious, as franchisors are expected to require overdue upgrades and capital infusions in the coming year to keep hotels at brand standards.
“Competitive bidding on auction sales and the purchasing of foreclosures and distressed assets, albeit at a slower pace, will also allow investors to acquire assets at a discount to replacement cost,” added Calhoun.
“Overall, the select service sector will experience a rise in transactions this year as compared with 2011. We are also likely to see the start of new construction return in 2014 causing a shift in the market dynamics and a new buying pool emerge,” added Mark Fair, managing director of Jones Lang LaSalle Hotels.