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Big Hotel Deals Overshadow Concerns In The Market

The Encore Boston Harbor, developed by Wynn Resorts.

Hotel investors are slowing down sales as recession concerns continue, but some headline-grabbing deals are warping the perception — and the data — of the market. 

In October, investors spent $4.6B on hotel acquisitions, seemingly a surge in activity, but almost two-thirds of that sum is attributable to Brookfield Asset Management's acquisition of Watermark Lodging Trust, Wealth Management reported. Overall, investors bought fewer hotels in October than in any month since 2020.

That continued the trend from the third quarter, which saw fewer hotel rooms trade than in the first or second quarter, even though the average price of hotels rose 9.7%, according to Colliers data.

Big-ticket hotel-and-casino transactions have continued, despite the economic headwinds. Blackstone sold its stake in two Las Vegas hotels, which have a combined value $5.5B, to Vici Properties this week. The REIT had a 49.9% stake in the MGM Las Vegas and Mandalay Bay.

Another casino giant, Wynn Resorts, closed on a $1.7B sale-leaseback deal for its Encore Boston Harbor resort to Realty Income Corp. Wynn will still operate the hotel as part of its 30-year lease.

Although the industry has recovered to post higher room rates and record revenues, the pace of growth in the industry is slowing — hotels have the highest cap rates among the major property types, according to Colliers. Leisure demand is also predicted to soften amid a potential global recession, leading to even more disruption.