be up 18.1 % from 2019 . Look for urban markets to lead the way and attract increased investment , with major markets , such as Chicago , Los Angeles and New York City , to drive transaction activity .
OPTIMISM ABOUNDS Even though 2023 witnessed the second-highest number of hotel transactions on record , the prevailing high cost of debt resulted in the lowest level of transaction volume in 10 years ( excluding 2020 ). Portfolio volume contracted to an unprecedentedly low level , comparable only to the two previous event crises of COVID-19 and the Great Financial Crisis ( GFC ). Additionally , the average deal size plummeted to its lowest point since the GFC , reaching just $ 31 million . This decline in portfolio volume and average deal price reflects the challenge investors face in financing larger deals . However , this sentiment is expected to pivot in 2024 . In the latest Federal Reserve meeting in December , its monetary policy view turned accommodative , with a new consensus that they will cut rates earlier and faster in 2024 . This shift will likely encourage hotel investors to be more acquisitive . According to our latest Global Hotel Investor Sentiment Survey , 81 % of investors are expected to be net buyers in 2024 , the highest total ever recorded since the inception of the annual survey in 2001 . This positive investor outlook bodes well for the
U . S . hotel investment market as the challenge of capital market dislocation will begin to ease . Expect investment activity to accelerate over the next 12 months .
MULTIPLE CATALYSTS TO SPUR ACTIVITY Investors should look forward to increased opportunities to purchase assets where the owners need relief from financial pressures . These pressures include the inability to refinance impending loan maturities , depleted CapEx reserves in the face of mounting PIP requirements and impending high-interest-rate cap renewals . By 2026 , $ 51.8 billion in hotel securitized debt is anticipated to mature . Further opportunities will arise from the need of private equity funds to sell their assets as they reach their fund-life expirations . Over the next four years , $ 11.2 billion in U . S . hotel closed-end funds are expected to reach the exit stage of their lifespan . Look for these stress points to spur some dispositions over the medium term .
Kevin Davis , CEO , JLL Hotels & Hospitality , Americas
• A VIEW FROM THE TOP •
Kevin Davis is the CEO of JLL Hotels & Hospitality , Americas , a position he was appointed to in 2021 . He is responsible for a host of activities for the global real estate giant , including investment sales , debt and equity placement and asset management . Since joining JLL in 2013 , he has been involved in more than $ 20 billion of hotel debt and equity financings . Here , he shares how he thinks 2024 will pan out .
HOTELS : What will the collective hospitality industry be talking about in 2024 ? Davis : How artificial intelligence will change the travel experience , ranging from travel planning to the guest experience . The industry is hard at work trying to figure out how to better satisfy guest preferences and AI will be a big driver in improving the guest experience .
HOTELS : What will be the biggest challenge next year for the hotel industry and how can it be overcome ? Davis : The biggest challenge will be the high cost of debt and its impact on investment returns and transactions activity . The high cost of debt will force a number of owners to sell , recap and in some cases — where there is no equity value — give back the keys to lenders . The fact that there will be motivated sellers — motivated by high debt costs — should bridge the bid-ask gap and should result in more transactions in 2024 .
HOTELS : What does the hotel industry do poorly that if it did better would result in a better experience for guests and higher returns for owners ? Conversely , what is the hotel industry great at ? Davis : The industry could do a much better job highlighting the career opportunities within hospitality to potential employees . We can do a much better job showcasing our industry and articulating the lifelong career opportunities within our space . Doing so will deepen the labor pool and attract high quality workers , which is good for our customers and owners . The one thing that we do exceptionally well is to respond to customer feedback . When we get suggestions from our customers , the industry generally responds to improve the customer experience . It ’ s no accident that we are in the business of hospitality , so taking care of and being responsive to our guests is of utmost importance .
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