PORTSMOUTH, N.H. — The average sales price per room for U.S. hotels in 2014 was $156,002, up a whopping 20.6 percent on a year-over-year basis. According to Lodging Econometrics (LE), the healthy increase stems from record-setting hotel revenues and profits, low interest rates and the availability of attractive financing terms.
LE reports that the total investment in the U.S. lodging industry was an estimated $30.8 billion last year. In 2014, of the 1,292 total hotel assets that transacted or transferred ownership, 935 reported a sales price.
The Portsmouth, N.H-based firm anticipates that hotel prices will accelerate for the next several years as hotel performance continues to shine in the absence of any significant new supply. A critical part of the equation is that interest rates, although expected to rise, still remain attractive causing competition to intensify for prized single assets and portfolios.
Since the market bottomed out in 2009 with 528 total transactions, deal volume over the last five years has ranged between 1,261 and 1,457 transactions. It is a narrow range far distant from the 3,218 transactions and transfers reported in 2007, according to LE.
There were 799 single-asset transactions and another 481 hotels that changed ownership as part of a portfolio sale in 2014, according to LE. A mere 12 hotels were recorded as part of merger activity.
How much M&A activity should the industry expect in the near term?
“It is thought that any significant industry-wide consolidation of companies and brands may still be at least two years away after the expansion phase of the current real estate cycle concludes and the maturity phase begins in 2017,” says Patrick “JP” Ford, senior vice president at LE.
— Danielle Everson