US Hotel Pricing Out-of-Whack With Fundamentals
Bloomberg reports: A recent article on Bloomberg News cited data aggregated by Real Capital Analytics (RCA) to juxtapose two trends that have become evident in the US hotel sector over the past year. RCA previously reported in its US Capital Trends reports that the average price-per-room paid by US hotel investors during the first quarter was $185,000, an prodigious relative peak well above the former high of $153,000, registered in 2006 at the peak of the market.
Yet Bloomberg points out that this spike has decoupled from hotel operators’ per-room revenue, which RCA’s Ben Carlos Thypin stated remain well below peaks last reached in 2008. “Daily room rates averaged $94.05 last year, and revenue per available room, an industry measure of occupancy and rate, was $42.40…That’s ‘well below’ the 2008 peaks of $106.65 and $54.42.”
Bloomberg attributed this disparity to two confounding factors. Part of the rise in valuations is driven by buyer selection bias: “This year’s jump is the result of a surge in luxury-hotel transactions and more purchases by real estate investment trusts, particularly in large cities,” stated Bloomberg. Values have also been pushed higher due to who has been purchasing hospitality properties over the past 24 months: Bloomberg cited additional data by RCA to state that, “Values have been driven up chiefly by demand from REITs, which purchased $1.6 billion of hotels in the first quarter. That’s 44 percent of those traded and five times the total of REIT purchases in all of 2007, the peak year for hotel sales.”
For additional information on the growing rift between valuations and fundamentals in the US hotel sector, as well as details on recent high-profile hotel trades, please see the full article on Bloomberg’s site.
View the full article on Bloomberg: US Hotel Pricing Out-of-Whack With Fundamentals
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Posted by: Nina Turner