By Daniel Lesser

After a tumultuous 4Q18, 2019 was a climb of the wall of worry as at several points many believed the grind higher was going to come to a halt, which did not occur. Although America’s financial system has been buffeted by a slowing global economy and the U.S. instigated trade war with China, it has been buoyed by the lowest unemployment levels during the past 50 years, and rising incomes which have fueled consumer spending and a generally optimistic sentiment. Although the U.S. economy is on solid footing, the longest period of expansion in its history places the nation in unchartered territory. The recent signing of a Phase One U.S./China trade agreement, which represents a formal truce, and the pending Canadian ratification of the United States Mexico Canada Agreement (USMCA) are positives, which coupled with sanguine American consumers and a continued low interest rate environment should result in continued moderate U.S. economic growth during 2020.

Although the U.S. hotel industry registered record-breaking performance levels during 2019, RevPAR growth was the lowest since the current cycle began in 2010.  Amid hotel demand and supply growth in relative equilibrium, continued inventory growth of Airbnb and other professionalized short-term rental platforms has the lodging sector now grappling with a lack of pricing power. The good news is that numerous municipalities have implemented regulations that should curb the impact of some of this alternative rental inventory on the hotel sector.

The LW Hospitality Advisors (LWHA) 2019 Major U.S. Hotel Sales Survey includes 164 single asset sale transactions over $10 million, none of which are part of a portfolio. These transactions totaled $17.7 billion and included approximately 48,800 hotel rooms with an average sale price per room of $363,000.

By comparison, the LWHA 2018 Major U.S. Hotel Sales Survey identified 208 transactions totaling roughly $18.3 billion including 51,100 hotel rooms with an average sale price per room of $357,000. By further comparison, the LWHA 2017 Major U.S. Hotel Sales Survey identified 182 transactions totaling roughly $13.6 billion including 51,000 hotel rooms with an average sale price per room of nearly $267,000.

Comparing 2019 with 2018, the number of trades decreased by approximately 21 percent while total dollar volume declined roughly 3.3 percent and sales price per room increased 1.7 percent. Comparing 2018 with 2017, the number of trades increased by approximately 14 percent while total dollar volume rose roughly 35 percent and sales price per room increased by 34 percent.

Notable observations from the LWHA 2019 Major U.S. Hotel Sales Survey include:

  • Sixty-six or 40 percent of the total number of 2019 sale transactions occurred in three states.
    • With thirty-six 2019 hotel sales, Florida has been the most active transaction market followed by California and New York with eighteen and twelve trades respectfully.
  • Thirty four of the 164, or 21 percent of 2019 U.S. hotel sale transactions, were for greater than $100 million each.
    • Eighteen of the 2019 hotel trades were between $100 and $199 million,
    • Five of the 2019 hotel sales were between $200 and $299 million,
      • Marriott International Inc. (MAR) acquired the 270-room W Union Square Hotel in New York, NY for $206 million or $763,000 per key, a 20 percent premium to the price the property traded for roughly a year ago when Westbrook Partners paid Host Hotels & Resorts, Inc. (HST) $171 million for the asset. The property sold for $285m back in 2006, but then also traded in 2010 for $185 million when HST purchased it. This strategic acquisition dovetails with MAR’s broader growth and brand-related objectives as the company intends to significantly renovate and reimagine the property into a “showcase” hotel for the W brand in North America. Furthermore, a motivating factor for MAR to complete this non-asset-light transaction was to protect the flag, given the property’s lack of brand and management encumbrances. This buy-renovate-sell-manage playbook is familiar and follows MAR’s successful execution with three EDITION properties, the Charlotte Marriott City Center and the Sheraton Grand Phoenix which is currently in process,
      • Host Hotels & Resorts, Inc. (HST) sold to KSL Capital Partners the 470 key Hyatt Regency Cambridge Hotel in Cambridge, MA for $227.3 million, or $484,000 per room. A robust hotel transaction market paved the way for HST to monetize a low RevPAR, high capital expenditure asset at appealing pricing,
      • Premier Group WLL based in Bahrain acquired the 215 room Four Seasons Hotel One Dalton Street, Boston for $268 million, or $1.25 million per unit from Carpenter & Company, Inc. who recently developed the property with a 61-story mirrored glass tower that separately includes a 160 Four Seasons Private Residences,
      • RIU Hotels & Resorts, a Spanish hotel chain aggressively expanding in the U.S. acquired from Acron U.S. Management Inc., the 531 key Sheraton Fisherman’s Wharf Hotel in San Francisco, CA for $270.3 million or $509,000 per room. The property was rebranded as the Hotel Riu Plaza Fisherman’s Wharf,
      • Magna Hospitality Group acquired the newly constructed 576-unit dual branded Fairfield Inn & Suites New York Manhattan/Times Square South & SpringHill Suites New York Manhattan/Times Square South for $274.3 million, or $476,000 per key from McSam Hotel Group.
    • Two of the 2019 trades were for between $300 million and $399 million.
      • Marriott International Inc. (MAR) sold the iconic 238 key St. Regis New York Hotel to Qatar Investment Authority for $310 million or $1.3 million per room. Earlier in the year Qatar’s sovereign wealth fund announced an investment in the shops at the base of the St. Regis New York Hotel. MAR, who will continue to operate the asset under a long-term contract, acquired the trophy property when it acquired Starwood Hotels & Resorts Worldwide LLC,
      • Blackstone purchased the 1,260 room Hyatt Regency Atlanta for $355 million or $282,000 per unit from Hyatt Hotels Corporation who will continue to operate the facility. Opened in 1967, the Hyatt Regency Atlanta was designed by internationally acclaimed architect John C. Portman, Jr., and was the first contemporary atrium-style hotel ever constructed.
    • Three of the 2019 trades were for between $400 million and $499 million.
      • A syndicate comprised of AllianceBernstein & GMB Properties, The Berger Co., & Fulcrum Hospitality acquired the 1,193 room Hyatt Regency New Orleans from Poydras Properties Hotel Holdings Co. for $400 million, or $335,000 per unit,
      • British luxury hotel operator Maybourne Hotel Group purchased from Ohana Real Estate Investors the 201 key Montage Beverly Hills in Beverly Hills, CA for $415 million, or almost $2.1 million per room,
      • KSL Capital Partners sold to Ohana Real Estate Investors the 400-unit Manarch Beach Resort in Dana Point, CA for $497 million, or $1.24 million per room.
    • Five of the 2019 trades were for between $500 million and $999 million dollars.
      • Caesars Entertainment Corporation (Caesars) sold the 2,548-unit Rio All-Suites Hotel & Casino in Las Vegas to Imperial Companies for $516.3 million, or $203,000 per unit. Caesars will continue to operate the property pursuant to a lease for a minimum of two years at $45 million in annual rent. The transaction also provides the buyer an option to pay Caesars an additional $7 million for the extension of the lease under similar terms for a third year. Caesars reportedly will retain its rewards customers and the hosting rights to the annual the World Series of Poker,
      • A joint venture between Trinity Real Estate Investments LLC and Elliott Management Corporation acquired the 950 room JW Marriott Phoenix Desert Ridge Resort & Spa for $602 million, or $634,000 per unit,
      • Subsequent to a reported more than $500 million acquisition by MSD Capital Partners, L.P., Host Hotels & Resorts acquired the 429 room 1 Hotel South Beach for $610 million or more than $1.42 million per room from a joint venture between Starwood Capital Group & LeFrak Organization,
      • MSD Partners, L.P. acquired of the 1,047 room Boca Raton Resort and Club, A Waldorf Astoria Resort from Blackstone for $875 million, or $836,000 per room,
      • MGM Resorts International sold the 3,767 room Circus Circus Hotel & Resort in Las Vegas, NV for $825 million, or $219,000 per room to an affiliate of Treasure Island owner Phil Ruffin.
    • A $4.25 billion sale-leaseback transaction of the 3,900 room Bellagio Hotel & Casino in Las Vegas, NV represents the highest amount ever paid for a U.S. hotel casino. The $1.1 million per unit deal includes 155,000 square feet of casino space, and the seller MGM Resorts International (MGM) agreed to a 30-year lease with two ten-year extension options with an “initial” annual rent of $245 million. MGM also retained a 5% ownership stake in the property.
    • Six U.S. hotel sales occurred at more than one million dollars per room including:
      • Bellagio Hotel & Casino Las Vegas, NV – $1.1 million,
      • Monarch Beach Resort Dana Point, CA – $1.24 million,
      • Four Seasons Hotel One Dalton Street, Boston – $1.25 million,
      • Regis New York, NY – $1.3 million,
      • 1 Hotel South Beach Miami, FL – $1.4 million,
      • Montage Beverly Hills, CA – $2.1 million.
    • Institutional investment entities that have been active purchasers and/or sellers of lodging assets include:
      • AJ Capital Partners,
      • Apple Hospitality REIT Inc.,
      • Ashford Hospitality Trust, Inc.,
      • AVR Realty,
      • Blackstone,
      • Brookfield Asset Management,
      • Clearview Hotel Capital,
      • Columbia Sussex Corp.,
      • CrossHarbor Capital Partners LLC,
      • Elliott Management Corporation,
      • EOS Investors LLC,
      • GAW Capital Partners,
      • Highgate,
      • Hospitality Properties Trust
      • Host Hotels & Resorts Inc.,
      • Hyatt Hotels Corporation,
      • KHP Capital Partners,
      • KSL Capital Partners,
      • London + Regional Properties,
      • Magna Hospitality Group
      • McSam Hotel Group
      • MGM Resorts International,
      • MSD Partners, L.P.,
      • Noble Investment Group,
      • Ohana Real Estate Investors,
      • Pacifica Hotels;
      • Park Hotels & Resorts Inc.,
      • Peachtree Hotel Group,
      • Pebblebrook Hotel Trust,
      • Platinum Equity,
      • Procaccianti Companies,
      • RLH Corporation,
      • RLJ Lodging Trust,
      • Starwood Capital Group,
      • Stonebridge Companies,
      • Summit Hotel Properties,
      • Sunstone Hotel Investors, Inc.,
      • Trinity Real Estate Investments,
      • Walton Street Capital,
      • Wheelock Street Capital, LLC,
      • White Lodging,
      • Xenia Hotels & Resorts, Inc.

During 2019, an abundance of capital fueled robust activity with lodging sector mergers, acquisitions, and spinoffs. Significant transactions included:

  • Marriott International (MAR) acquired UK-based Elegant Hotels Group (Elegant) for total consideration of $199 million. Elegant owned and operated seven luxury all-inclusive properties with 588 rooms and a beachfront restaurant in Barbados, a market in which MAR had only one property, namely an off-beach Courtyard. In keeping with its asset-light strategy, MAR intends to market the hotels for sale subject to long-term management agreements,


  • InterContinental Hotels Group acquired from Pegasus Capital Advisors the brands and operating companies of Thailand-based Six Senses Hotels Resorts Spas for $300 million in cash,


  • In a deal worth an estimated $1 billion, Advent International-backed hotel operator Aimbridge Hospitality acquired Interstate Hotels and Resorts from Kohlberg & Company The merger of two significant independent hotel operators resulted in a combined management portfolio of more than 1,400 hotel properties in 49 states and 20 countries,


  • Park Hotels & Resorts Inc. closed a $2.7 billion acquisition of Chesapeake Lodging Trust,


  • As part of a $2.9 billion joint venture transaction between Blackstone Real Estate Partners IX (Blackstone) and Centerbridge Partners, L.P., Blackstone acquired a 65% controlling interest in Great Wolf Resorts, Inc. The transaction included 18 owned and operated family-oriented water park entertainment resorts around the nation.


  • A reported frenzied bidding process amongst more than a dozen investor groups facilitated Anbang Insurance Group Co.’s (Anbang) disposition of a 15-property luxury hotel portfolio for $5.8 billion to Mirae Asset Global Investments. The collection, which was formerly owned by Strategic Hotel & Resorts was purchased by Anbang from Blackstone in 2016,


  • In a deal scheduled to close in early 2020, Eldorado Resorts Inc. definitively agreed to purchase Caesars Entertainment Corp. for about $8.58 billion in cash and stock, a merger that will create the largest U.S. casino operator by venue count.


Additional commentary on the U.S. hotel market based upon my observations:

  • Lodging sector overhang risks that loom on the horizon include:
    • With flat U.S. RevPAR anticipated for 2020, expense growth is a key risk for hotel owners,
    • Continued strength of the U.S. dollar will continue to render international inbound visitation to the U.S. relatively expensive,
    • Unabated domestic political turmoil that is all but guaranteed to intensify leading up to the outcome of the impending U.S. Presidential election later this year,
    • Slowing growth in China and a coronavirus virus outbreak that originated there,
      • American hotel owners and operators are keeping an eye on the fast-advancing spread of the coronavirus from China, as travel advisories and quarantines threaten business from a significant source of inbound U.S. travelers. Although similar global health scares have not previously had a long-term impact, if fears of contagion escalate, negative short-term effect(s) on the hotel industry could be material,
    • Following a 2016 United Kingdom (UK) referendum Brexit has finally occurred and Britain is in a transition period until December 31, 2020 during which its trading relationship with the EU will be negotiated. No extensions to this transition period are anticipated leaving the UK exposed to a potential “no deal” scenario once again at the start of 2021,
  • Positives for the U.S. hotel industry include:
    • Despite warnings of possible economic fragility, jobs creation statistics remain relatively steady and personal incomes continue to grow, both of which could sustain the financial system during whatever rough patches may be encountered. Not everyone believes a recession is imminent, and contrarians can point to other metrics that paint a much sunnier picture. Either way, the prevailing view seems to be that when the next recession hits, it will be less severe than the last one,
    • While investors are increasingly cautious, debt and equity investment capital remain abundant. With global bond yields expected to remain extremely low and equity markets likely weaker and more volatile, stable hearty returns generated by American commercial real estate, particularly lodging assets will be even more attractive,
    • The hotel industry is experiencing one of the tightest and most expensive construction labor markets in years, which places negative pressure on the economic feasibility of new supply.

While the near-term outlook for the U.S. lodging industry remains positive fundamentals, given myriad of global and domestic issues that can rapidly develop into full blown crises, short term future industry performance is fragile. With this said, so long as U.S. economic expansion endures, the outlook for lodging fundamentals will remain positive resulting in continued deployment of domestic and foreign investment, and institutional capital into single assets and portfolios of all types and locations of U.S. hotels.

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