U.S. Hotel Market Now At A Standstill

U.S. hotel sales have dropped to historic lows, with fewer than 10 properties trading hands nationwide in April, Real Capital Analytics reports.

hotel

"We have never seen this level of illiquidity in the hotel market," RCA Senior Vice President Jim Costello wrote. "It is effectively a frozen marketplace."

The coronavirus pandemic wasn't the only factor driving the market down, he said. Sales were already dropping because of excess product in some markets and competition from companies like Airbnb.

The last time the hotel market was even close to being this slow was in 2009, when 21 properties traded, according to RCA data.

A separate survey by the Lodging Industry Investment Council, completed in late April, pointed to a wait-and-see attitude among many would-be hotel investors.

Namely, 64% of investors surveyed said they are still "cautiously underwriting" new lodging investments. But 74% are taking a wait-and-see approach at the same time.

In a March LIIC survey, only 9% of respondents said they believed the total dollar volume of U.S. hotel transactions in 2020 would drop more than half compared to 2019. In the organization's April survey, 32% said that.

Another reason for the slowdown in investment sales seems to be a disconnect between buyer and seller expectations.

"I'd say that the COVID-19 discount gap is too wide right now," Park Hotels & Resorts Chairman and CEO Thomas Baltimore said last week during the company's latest earnings call.

"Sellers would probably like to sell with a 10%, perhaps even 15% discount, depending on their individual needs," Baltimore said. "But I think buyers are looking for somewhere north of 30%, even 40%.

"So I think there's plenty of liquidity trying to get in this sector, recognizing that now is a good window to begin to build up a portfolio, but I think the gap is too wide to really expedite any sort of transaction," Baltimore said. "You should see the number of deals that have blown up here in the last few weeks."

Continue reading this story with a free account

Log in or register
Sign up for more articles like this
Subscribe to Bisnow's National Newsletters
Related Stories

Social Housing Providers Turn To Bond Markets To Fund Expansions

Political Campaigns Have Spent $87M Making Data Centers A TV Villain

Soar AI Secures $1B Equity For Industrial-To-Data-Center Development

Service Properties Trust Gets Surprise $2B Cash Bid For 93 Hotels

How AI Is Reshaping Brokerage Operations And Investor Portfolios

Meet The Early Movers In America's $3T Push For Manufacturing Construction

Spirit Christmas Unveils Plans To Grow Store Count This Holiday Season

Stephen Ross, Jeffrey Soffer Scrap Plans For Miami Airport Hotel Project

Hurricane Isaias Puts More Than $40B In Multifamily Property In Its Path

Braemar Inches Closer To Ashford Breakup With $372M Hotel Sale

Workers At 6 Chicago Hotels Go On Strike Ahead Of Chicago Marathon

Transformers: Yet Another Data Center Power Infrastructure Supply Chain Bottleneck