US hotel deals bounce back in 2017

STR tracked 567 individual hotel transactions and 35 portfolio sales in 2017 to produce the Hotel Transaction Almanac, a comprehensive annual report detailing hotel asset trades over the past year in the U.S. (STR is the parent company of Hotel News Now.)

The Transaction Almanac features a list of non-confidential hotel transactions as well as aggregate breakdowns by region, class, chain scale, location type and other property classifications for numerous key metrics. The report also discusses historical trends in data points such as deal volume, pricing, cap rates and interest rates, and includes an examination of acquisition activity by real estate investment trusts in 2017 and over the past eight years. The data used in the report is sourced from STR’s in-house transaction database and from data partner Hotel Brokers International.

Transaction volume
After a dip in 2016, transaction volume rebounded in 2017, with 567 property transactions recorded by STR. This represented 59% growth in the number of transactions and a 27% increase in transaction volume to $20.1 billion.

Expectations for 2018 are for a similar level of hotel transaction volume, with strong operating fundamentals balanced by increasing interest rates and new supply.

Acquisitions by buyer type
In 2017, real estate companies accounted for the greatest percentage of hotel acquisitions with 24% of all deals. Real estate investment trusts represented 20% of 2017 acquisitions, an increase in both the purchase share and number of REIT purchases over 2016 levels.

The 24% of transactions classified as “other” include high-net-worth individuals, golf companies, universities and entertainment companies.

Acquisitions by chain scale
Upscale chain scale hotels account for 28% of all 2017 sales. With the exception of last year, upscale properties have represented the greatest percentage of hotel transactions by chain scale since 2011.
Luxury, midscale and economy properties have transacted at relatively low levels in recent years. Similar to 2016, independents accounted for almost a quarter of all hotel asset trades in 2017.

Major market sales
New York City topped the list of major market sales by total number of sales, with 22 hotel transactions in 2017 representing 4,285 rooms. New York City also achieved the second-highest average price per room at $482,000 per room. The market with the highest price per room was Oahu Island, Hawaii, where two high-priced resort transactions resulted in an average price per room of $656,000.

Atlanta, Georgia, saw the greatest number of rooms represented in 2017 transactions with 5,268 rooms in 16 properties. The Washington, D.C./Maryland/Virginia market and Los Angeles/Long Beach, California, also saw high transaction activity in terms of both number of total deals and number of rooms.