BROOMFIELD, Colorado—U.S. hotel transactions were down 74% year over year from March to May 2020, according to the just-released Hotel Transaction Almanac produced by STR’s Consulting & Analytics office and CoStar Group.
“The industry went from a position of record profit levels to financial distress in a matter of weeks, creating a shift in focus for those in the transactions community,” said Hannah Smith, a senior consultant at STR. “Looking ahead, we expect transaction activity to eventually pick up, while pricing will continue to decline later in the year, as investors look to acquire distressed assets at a discount. While activity in the sector will likely remain slow into the third quarter, we expect robust transaction activity late in the year, as the industry begins to see the light at the end of the tunnel.”
First five months of 2020
Transaction volume through February was up 14% year over year even with the total number of transactions down slightly from 514 to 457. For March through May, volume was down 74% in year-over-year comparisons, and much of the decline in transaction volume was due to a substantial decline in the number of hotel transactions (-48% YTD).
April showed the largest decline in number of transactions (-86%), with only 43 hotels sold during the month compared to 317 in April 2019. However, May represented the greatest decline in total transaction volume (-94%) with only 68 assets sold for a total volume of $112 million. By comparison, May 2019 produced 329 hotels sold for a total of $1.8 billion. For additional context, 34 single hotel sales from 2019 represented a larger value than the sum of May 2020 transactions.
Overall, 2019 covered 3,897 property sales totaling $41.5 billion. The number of transactions ranked behind only 2007, 2018 and 2015.
“2019 transactions were similar to previous yearly levels as investors looked to capitalize on what was still an incredibly profitable operating environment,” Smith said. “The sale of the Bellagio contributed greatly to the total transaction volume, with the $4.25 billion purchase price representing more than 10% of the total transaction volume. That price is the largest single property hotel sale in CoStar Group’s database. Excluding that sale, 2019 transaction volume would have been more like 2016 and 2017 levels.
The next four highest-priced sales, all above $600 million, came in Boca Raton, Las Vegas, Miami Beach and Phoenix.