Avison Young Hospitality Group Discusses 2018 Hospitality Market Trends
May 10, 2018 11:58am
Principal H. Keith Thompson highlights key developments during 2018
By: H. Keith Thompson, principal, Avison Young Hospitality Group
Thursday May 10, 2018
The last five months have been unusual for the hotel transaction market. Some of the hotel real estate investment trust (REIT) stocks began to compress in late January, resulting in fewer REIT purchases than the first five months of the same time period in recent years. This market change began after the ALIS hotel investor conference in late January, which is somewhat countercyclical, given there is usually an uptick in stocks after investment conferences. Clearly, market analysts heard news at the conference that caused concern, which led to pull back on hotel REIT valuations.
The Avison Young Hospitality Group believes a considerable amount of top tier product was priced late in 2017 for sale to public REITs. When REITs began to pull away from the transaction market, it caused a bid/ask spread to develop, resulting in fewer sales transactions to be consummated early this year, versus the same time period in recent years.
Over the past three weeks hotel REIT stocks have rebounded nicely, although many are still short of market pricing from six months ago. I do, however, expect the current pricing trend to bode well for hotel transactions in the second half of 2018.
Concern regarding public companies has caused debt to be more expensive today than six months ago and spreads have widened due to multiple concerns with EBITDA. We believe the impact of these changes over a five-year internal rate of return (IRR), will be mitigated by continued RevPAR increases provided those increases outpace the two to three percent annual cost creep to labor and taxes. Despite these factors, we are still in historically low debt cost territory relative to past market cycles.
Additionally, we are seeing heavy increases in hotels that are going into special servicing for a plethora of reasons, but it is still a concerning component given the public secondary debt market is vital to the overall financial health and function of the hotel transaction market. Should this trend continue, it may push the market more to on-balance sheet lending. We believe this could be the beginnings of the next down cycle.
Avison Young currently has more than $500 million worth of hotel transactions under sale agreement with 214 assets on the market. When asked, “why don’t you have all your engagements on your website,” the simple answer is that many of our assets are in portfolios and all sales of portfolios are private in nature and therefore not public knowledge. We just revised our website to better portray our public and private offerings. For more information, visit hospitality.avisonyoung.com.
Tags: avison young,
avison young hospitality group,
h. keith thompson,
real estate investment
Avison Young is the world’s fastest-growing commercial real estate services firm. Headquartered in Toronto, Canada, Avison Young is a collaborative, global firm owned and operated by its principals. Founded in 1978, the company comprises 2,400 real estate professionals in 79 offices providing value-added, client-centric investment sales, leasing, advisory, management, financing and mortgage placement services to owners and occupiers of office, retail, industrial, multi-family and hospitality properties.
Contact: Mike Rieman
Avison Young Hospitality Group is a national hotel practice group supported by 69 North American office locations and 2300 people. The firm currently has 214 hotels on the market totaling $3.4 billion in market value and for the past five years, the firm has been involved in one hotel transaction every five days. Avison Young Hospitality Group specializes in select-service and full-service hotels within the U.S. and works with CMBS lenders, whole loan banks, REITs, public companies, investment funds and private investors. The hospitality group can be found at www.avisonyoung.com under the “services” tab.
Avison Young Announces Recent Closings
Avison Young Announces Portfolio Sale in San Francisco
Avison Young Closes 260 Million YTD 2019
Avison Young Hospitality Group Announces Recent Closings
Hospitality M&A Focus to Shift to Smaller, Niche Platforms in 2019
Waterford Hotel Group and Waterton Forge Partnership
Avison Young Hospitality Group Recent Closings
Avison Young Hospitality Group Recent Closing
Many Hotel Sellers Won Big in 2018
Market Snapshot: Asia Pacific 2018
Paramount Lodging Advisors Successfully Completes Another Texas Transaction with the Sale of the Courtyard by Marriott in Beaumont, TX
Avison Young Hospitality Group Discusses Recent Contracts
Avison Young Hospitality Group Debt, Equity and Structured Finance Team Announces Closings
Avison Young Hospitality Group Announces Market Milestone
Q2 U.S. Lodging Market Update
Avison Young Hospitality Group Expects Strong Transaction Market in 2018
Hotel Capital Acquires The Tremont Chicago Hotel at Magnificent Mile and Mike Ditka’s Restaurant
U.S. Hotel Deal Pace Going Strong
Please login or register to post a comment.