Login

Hotel Advisers Expect a 'Very Robust' Deals Market

Capital Chasing Deals Could Entice More Owners To Sell
Mark Schoenholtz (left), of Newmark, and Jeffrey Davis, of JLL, speak during a transactions panel at the Americas Lodging Investment Summit. (Bryan Wroten)
Mark Schoenholtz (left), of Newmark, and Jeffrey Davis, of JLL, speak during a transactions panel at the Americas Lodging Investment Summit. (Bryan Wroten)
Hotel News Now
February 8, 2022 | 1:41 P.M.

LOS ANGELES — The U.S. hotel transactions pace set in 2021 should carry over through 2022 and even into 2023, according to several industry experts.

During the “Acquisitions Track — Transactions Outlook” panel at the Americas Lodging Investment Summit, hotel industry advisers and owners spoke about how condition remain favorable for hotel deals heading into a new year.

Last year was probably a record year for most firms as transaction activity was off the charts, said John Bourret, managing director at Hodges Ward Elliott. His company is heading into 2022 with as large of a pipeline as it had last year.

“If the capital markets hold up, if the debt financing markets still hold up, there's plenty of equity out there — I think it'll be a very robust transaction market,” he said.

The hotel industry was doing well after bouncing back from the COVID-19 delta variant, but then omicron appeared around Thanksgiving, said Mark Schoenholtz, vice chairman and co-head of lodging for Newmark. That affected some owners looking to sell, but possibly only by pushing them back about 30 days to take something to market.

“I think we're going to be just as busy as 2021, maybe fitting 12 months of transactions into 10-and-a-half months, 11 months,” he said. “The only thing out there I think that's a real issue is, what is the interest-rate environment look like?”

Echoing Schoenholtz’s comments, Andrew Holt, managing director at Eastdil Secured, said 2021’s transactions didn’t fully pick up until the spring, meaning the industry saw a tremendous acceleration of deals over about eight-and-a-half months.

“I think that this year probably ends up starting towards the end of February or March, so we're bullish about that,” he said. “That translates to more overall volume this year than last year.”

There has been more capital raised in the last two-and-a-half years than probably any time in the industry’s history, said Jeff Davis, senior managing director at JLL’s Hotels & Hospitality Group. Investors lined up for the distressed deals that didn’t happen, and that money has to go somewhere.

“It's all chasing quality product,” he said. “You're going to see much more product come out over the next two years. We're at the beginning cycle.”

There's been a dichotomy of too much capital without enough hotels to keep up, Schoenholtz said. All of that money chasing deals and driving up prices is going to encourage more owners to put their hotels up for sale.

Hotels still offer a relatively attractive yield compared to other real estate classes, he said. In comparison to where industrial and multifamily are trading, hotels can in some instances yield double.

Another factor that could force more hotels into the marketplace is hotel brands that have been lenient with their property improvement plans over the last two years will require movement soon, he said. Those projects probably cost 15% to 20% more than they did two years ago, and that’s on top of regular capital repair and maintenance that may have been put off.

“I think you’re going to reach an inflection point,” Schoenholtz said.

Return to the Hotel News Now homepage.