Hotel News Now reached out to brokers to get their thoughts on the hotel transactions landscape in 2019.
REPORT FROM THE U.S.—2018 turned out to be a record year for hotel transactions, and hotel brokers are starting to think about what this year will look like.
In this virtual discussion, Hotel News Now reached out to hotel brokers to find out what they’re expecting to see in terms of transactions in 2019.
Q: What will drive transactions pace in 2019?
Mike Cahill, CEO and founder, Hospitality Real Estate Counselors:
“The pace of transaction will continue the strong volume exhibited in 2018. The rocket fuel will be eager, abundant equity dollars seeking high hotel yields; the facilitator will be a wide variety of available and reasonably priced debt (leverage) instruments.”
Jennifer Church, president, Hotel Brokers International:
“We believe the 2019 transactions pace will be driven by the continued availability of financing for buyers, steady performance statistics for the properties on the market, and the buyer’s drive to operate properties more efficiently than the current ownership.”
Daniel Beider, chairman and senior managing director, Paramount Lodging Advisors:
“The continued availability of equity and debt from both historical and new participants to the industry as well as the continued development and use of technology in the CRE marketplace.”
Lee Hunter, COO, Hunter Hotel Advisors:
“Capital…Who has it? What return does it require? How quickly does it need to be invested?”
Ed James, managing principal, Mumford Company:
“Hotel real estate prices remain at cyclical high levels as we enter 2019. Property-level operating results continue to improve in many markets despite the significant addition of new supply. Purchasers are still looking for quality assets with superior locations and better markets and this will drive our markets through 2019 and perhaps into 2020.”
Q: 2018 had the most hotel transactions during the current cycle. What does that say about the state of the cycle?
Cahill: “I am a member of the new cycler club, (and) believe a new mini-cycle started in 2016 and we are only three years in. So goes the economy, so goes the hotel investment cycle. Most indicators are positive, albeit stabilization or slight decline may occur in 2020.”
Church: “We anticipate the cycle will remain steady as lodging properties continue to be a solid investment for both experienced and first-time operators.”
Beider: “It says that we should stop trying to determine when the cycle will turn and continue to focus on fundamentals, like economic conditions, and how again changes in where equity and debt are/can come from and how technology is impacting the marketplace.”
Hunter: “As long as (revenue per available room) growth continues to be positive—2% growth may not be 3% growth, but it’s still positive growth—you will continue to see transactions taking place…if pricing is right.”
James: “There is no question that we are in the later stages of this market cycle. Our strong economic environment and current demand levels, however, should push this market another year or perhaps two before we begin the inevitable correction. We do not anticipate a dramatic market crash as we had in 2008, however. Market fundamentals are still much stronger than they were at the end of the last cycle thus the correction and subsequent recovery should be much less dramatic.”