Upscale and Luxury Lodging Transactions Continued at a Swift Pace in 2007
The number of upscale and luxury lodging transactions in 2007 remained high despite rising caution on the part of investors. Over $18 billion in assets sales occurred in 2007, compared to $21 billion in the 2006.
Denver, CO, January 28, 2008 --(PR.com)-- More than $18 billion in upscale and luxury lodging facilities changed hands in 2007, according to Stephen Hennis, Managing Director of Hospitium. This compares to the record level of over $21 billion in transactions that occurred in 2006. A total of 279 properties traded last year, slightly more than the 263 assets that sold in the prior year. “The number of transactions in 2007 remained very high despite some market uncertainty and additional caution on the part of investors,” Hennis states.
While the investment appetite for upscale and luxury products has been consistent, the average price per room waned from a record level of $243,000 in 2006 to $202,000 in 2007. “While lodging investments, particularly at the high end, continue to be highly attractive to the investment community, it appears that we have passed the peak in this real estate cycle,” Hennis says. “From late 2004 through 2006, all of the stars aligned with a flood of capital, the high availability of debt, and robust revenue growth. In 2007, we began to see lenders pull back from riskier deals and RevPAR growth taper to a more moderate level.”
In comparison to 2005 and 2006, very few trophy-level assets traded in 2007. The Point at Saranac Lake in upstate New York garnered the highest price per room in 2007 at more than $2.7 million per room. The Maui Prince Makena in Hawaii, which attracted the highest sale price in 2007 at $575 million, also achieved a high per room mark at approximately $1.8 million per unit.
Dallas experienced the most investment activity last year in the upscale and luxury hotel sectors, while New York, Washington, and New Orleans followed as the most active markets. “The rise in the number of transactions in New Orleans over the past year is a great sign for the city,” Hennis emphasizes. “Following Hurricane Katrina, many investors were hesitant to enter the market, but it appears that they are now more optimistic about New Orleans’ return to stature as one of the nation’s top hotel markets.”
Despite concerns about the national economy, the outlook for the lodging industry remains positive. “While deal pace and revenue growth are anticipated to slow over the next twelve months, performance is expected to remain strong. The lodging sector is much more prepared to withstand an economic downturn this time around,” Hennis notes. “The upscale and luxury supply pipeline has remained in check throughout this cycle and many of the management initiatives implemented to maximize cash flow during the prior slowdown remain in place.”
About Hospitium
Hospitium is a hotel consulting firm that specializes in the upscale and luxury sectors of the lodging industry. From the early stages of development or deal negotiation through asset disposition, Hospitium delivers timely and useful research, analysis, and insight that assist the various needs of owners, developers, management companies, and financial institutions. Hospitium provides a wide array of advisory services and products, including feasibility studies, market analyses, due diligence, underwriting, strategic planning, development consulting, and transaction guidance.
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While the investment appetite for upscale and luxury products has been consistent, the average price per room waned from a record level of $243,000 in 2006 to $202,000 in 2007. “While lodging investments, particularly at the high end, continue to be highly attractive to the investment community, it appears that we have passed the peak in this real estate cycle,” Hennis says. “From late 2004 through 2006, all of the stars aligned with a flood of capital, the high availability of debt, and robust revenue growth. In 2007, we began to see lenders pull back from riskier deals and RevPAR growth taper to a more moderate level.”
In comparison to 2005 and 2006, very few trophy-level assets traded in 2007. The Point at Saranac Lake in upstate New York garnered the highest price per room in 2007 at more than $2.7 million per room. The Maui Prince Makena in Hawaii, which attracted the highest sale price in 2007 at $575 million, also achieved a high per room mark at approximately $1.8 million per unit.
Dallas experienced the most investment activity last year in the upscale and luxury hotel sectors, while New York, Washington, and New Orleans followed as the most active markets. “The rise in the number of transactions in New Orleans over the past year is a great sign for the city,” Hennis emphasizes. “Following Hurricane Katrina, many investors were hesitant to enter the market, but it appears that they are now more optimistic about New Orleans’ return to stature as one of the nation’s top hotel markets.”
Despite concerns about the national economy, the outlook for the lodging industry remains positive. “While deal pace and revenue growth are anticipated to slow over the next twelve months, performance is expected to remain strong. The lodging sector is much more prepared to withstand an economic downturn this time around,” Hennis notes. “The upscale and luxury supply pipeline has remained in check throughout this cycle and many of the management initiatives implemented to maximize cash flow during the prior slowdown remain in place.”
About Hospitium
Hospitium is a hotel consulting firm that specializes in the upscale and luxury sectors of the lodging industry. From the early stages of development or deal negotiation through asset disposition, Hospitium delivers timely and useful research, analysis, and insight that assist the various needs of owners, developers, management companies, and financial institutions. Hospitium provides a wide array of advisory services and products, including feasibility studies, market analyses, due diligence, underwriting, strategic planning, development consulting, and transaction guidance.
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Contact
Hospitium
Stephen Hennis, CHA
303.506.0250
www.hospitium.com
Stephen Hennis, CHA
303.506.0250
www.hospitium.com
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