Survey: Rising cap rates, fewer transactions on horizon
 
Survey: Rising cap rates, fewer transactions on horizon
02 MARCH 2016 9:53 AM

Hunter COO Lee Hunter foresees gradual RevPAR growth, rising cap rates, transaction decreases and possible Airbnb impact on hotels in gateway markets in 2016. 

ATLANTA—Results from Hunter Hotel Advisors’ pre-conference surveys indicated that hoteliers recognize they’re facing greater headwinds than in 2015.

“As I look through (the results,) some of the things aren’t overly surprising,” Hunter COO Lee Hunter said via telephone interview ahead of the upcoming Hunter Hotel Investment Conference. “You can tell in some of the answers that people are starting to see the changes in the market.” 

Two different surveys were distributed to hotel owners and non-hotel owners, with the majority of survey responses coming from super regional owners, who make up the majority of Hunter Hotel Conference attendees, according to Hunter. This year’s conference is scheduled for 16-18 March at the Atlanta Marriott Marquis.

Hunter’s market outlook reflected in survey results
Hunter said he sides with the 51% of non-hotel owners who said cap rates would rise in 2016 and predicts a level playing field when it comes to bidding between super regional hotel owners and private equity companies.

“The (real estate investment trusts) are gone,” he said. “They’re sitting on the sidelines right now. … And the private equity guys, they’re smart guys and they’re realizing there are other things than cap rate involved here, and so they’re not paying the seven, seven-and-a-half cap rate anymore, they’re paying the eight-and-a-half, nine.

“But they’re where the super-regionals have been. … So the playing field is now level.”

Of those surveyed, 47% of non-hotel owners said transaction volume will be lower than last year. Hunter said he predicts “nothing will happen” in the first and second quarters of 2016, and that survey results support his outlook.

Hunter vs. owners: Differing market predictions
While most of the survey answers supported Hunter’s forecast for 2016, he said he didn’t agree with the 26% of hotel owners who said they think business will be slower this year than it was in 2015.

“When they say slower, they’re presuming revenues, but you know, I think (revenue per available room) is going to continue to grow,” Hunter said. “I think the rate of growth will be slower, but I still think it will be positive.”

Hunter predicts transaction volumes will slow until the “value number is reset.” He said the industry is past its peak, but that doesn’t mean performance will fall drastically.

“I think (the industry) will come down a little, settle and hit a plateau,” Hunter said.

Be on the lookout for Airbnb
A total of 76% percent of hotel owners surveyed by Hunter said that the sharing economy including Airbnb would have little to no impact on the hotel industry, Hunter said. Because many Hunter Hotel Conference attendees are from areas such as Murfreesboro, Tennessee, and Oklahoma City, that statement could be true to individual hoteliers, but Hunter said gateway markets, such as New York City, Chicago and Miami, should be paying attention to Airbnb this year.

“In your major gateways, your New Yorks, your Chicagos, San Francisco, Miami, (Washington,) D.C., those cities, I think Airbnb is something people should pay attention to,” Hunter said. “But in secondary or tertiary markets, and even once you get outside the top 10, go to 11 through however many, I don’t think Airbnb is too much of an issue in secondary or tertiary markets.”

2 Comments

  • Joel Ross March 2, 2016 11:31 AM Reply

    Lee's survey is consistent with my view that the big party is over. You should have sold last year. The slowdown has begun, cap rates are up and leverage is no longer the same nor the same capital cost. Values will be flat at best to down a little

  • Joel Ross March 2, 2016 11:31 AM Reply

    Lee's survey is consistent with my view that the big party is over. You should have sold last year. The slowdown has begun, cap rates are up and leverage is no longer the same nor the same capital cost. Values will be flat at best to down a little

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