Despite many analysts adjusting their forecasts down in light of high levels of robust new supply coupled with an anticipated increase in interest rates, “deal velocity and prices in the hospitality market remain strong,” says Marcus & Millichap agent Jerry Swon (below).
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He joined M&M just two years ago to invigorate its hospitality team in NYC, and his team of five covers the Northeast and New England markets.
Bid-to-ask spreads are tightening, he says, a sign of mounting interest and liquidity, and cap rates have shifted upward by 50 to 100-plus basis points.
Further, year-over-year occupancy may have been flat in Q3, but average daily rate and revenue per available room are both slightly up, 3.4% and 3.3%, respectively, according to lodging research firm STR.
These market indicators may encourage some owners who have been on the sidelines to step in as sellers.
“We see a market particularly hungry for value-add opportunities,” Jerry says. “[But] we have passed the peak and may be headed into an extended plateau period."
He points to increased Property Improvement Plan demands brands have put on owners, like the Forever Young Initiative by Hilton and Formula Blue by IHG/Holiday Inn Express, as exerting downward pressure on owners. These cause higher requisite capital expenditure to be reinvested into their hotels to continue their association with the brand.
“This has been another motivation for certain sellers to decide to bring assets to market while well-capitalized buyers can refresh or reposition the assets,” he says.
Jerry’s group, Swon & Partners, has grown to a team of five sales agents with a marketing and analyst support staff since its inception in 2014. The partnership has exclusively listed, facilitated financing or closed on more than $250M in hospitality assets.
The team takes a collaborative approach to brokerage, bringing buyers and sellers together through the Marcus & Millichap platform and leveraging close working relationships with other M&M hospitality teams around the country.
They provide a complimentary Brokers Opinion of Value to any interested hotel owner, and offer advisory services for both acquisitions and dispositions of hospitality assets.
To learn more about this Bisnow content sponsor and No. 1 national hospitality brokerage in terms of transactions, click here.
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