Although this isn’t the my first day in the world of hotel acquisitions, it is my first day blogging about it.
Since the upheaval of the U.S. economy (and all the aftermath), the U.S. hotel industry has experienced unprecedented turmoil. Multiple factors (credit market contraction, overleveraged/overpriced hotels, CMBS debt maturing, consumer confidence tanking, government intervention, etc.) have influenced the current rate slashing and plummeting of hotel values.
Since the end of 2008, hotel companies have been preparing for “great buys of the century”. In fact, HotelNewsNow.com – Smith Travel Research’s online news forum, reported hotel funds poised to purchase. (see http://www.hotelnewsnow.com/Articles.aspx?ArticleId=1893&ArticleType=1&PageType=Latest) But where are the deals? Special servicers are frantically working out deals with hotel owners to avoid a onslaught of foreclosures.
We know who the major cash holders are now, so when will the hotels start being sold? I think we’ll start seeing the sales when the economy recovers and consumers start spending again and RevPARs and hotel values increase. Right now, banks and owners don’t want to sell based on current values. Because hotel values are tightly linked to net operating incomes (past, present, and future) and cap rates, no one really has an idea of what a hotel is worth. There is no basis for cap rates because very few transactions above $10 million are occurring, and current NOIs are horrible – to say the least. No one is confident about what the future holds, so no one is forecasting very far into the future. (And if they are, it’s vague.)
2008: Brace yourself.
2009: Wait and see.
2010: Wait and see.
2011: Action! (maybe…)