Extended Stay acquisition is unlikely in 2022 ( US $ 6 billion ), expect small portfolio acquisitions to accelerate , driven by an uneven recovery and ownership desires to stabilize cash flow .”
The biggest barrier to getting deals done , Guichardo says , is that many hotels continue to operate in a zerocash flow environment . This has hampered investors ’ ability to accurately value assets and close deals . “ As the industry continues its recovery , cash flow should begin to stabilize , which will increase confidence and should accelerate transaction activity ,” she adds . “ With plenty of capital available in 2022 , investors will need to adopt a strategic approach to identify quality assets for acquisition .”
On the financing side , Guichardo says hotel debt markets have improved significantly over the past few months as banks , debt funds , and even CMBS lenders have selectively returned to originating hotel loans . “ Lenders remain keenly focused on the quality of sponsorship , with the wider lending community supporting the top sponsors ,” she says . “ 2021 lending demand has been highest for low-risk , outperforming hotel asset types , particularly resorts , trophy assets , and luxury hotels . As cash flow stabilizes , the lending appetite should increase for hotels in urban and gateway cities .”
That said , Guichardo adds that with continued uncertainty regarding the outlook for global lodging demand post-COVID , the global financing market is not expected to normalize in the short-medium term . “ Akin to the post Great Financial crisis , the financial landscape is being dominated by debt funds , which are quoting up to 70 % LTV , while banks are quoting 55 % to 60 % LTV . This is expected to continue in the near-term .”
If interest rates start to rise in 2022 , Guichardo points to history , which has shown an associated increase in hotel transaction volume . She says over the past decade , the 10-year U . S . Treasury Yield peaked at 2.9 % in 2018 , which corresponded to the second-highest transaction volume year ( US $ 34 billion ) over the same period . Therefore , she says , rising interest rates should further boost investment activity into 2022 .
HOTELS reached out to multiple analysts , brokers and consultants around the world to ask for their forecast for M & A for 2022 . Over the following pages , we will offer regional transaction outlooks for North America , Europe and Asia Pacific .
2021 LENDING DEMAND HAS BEEN HIGHEST FOR LOW-RISK , OUTPERFORMING HOTEL ASSET TYPES , PARTICULARLY RESORTS , TROPHY ASSETS , AND LUXURY HOTELS . AS CASH FLOW STABILIZES , THE LENDING APPETITE SHOULD INCREASE FOR HOTELS IN URBAN AND GATEWAY CITIES .
– GERALDINE GUICHARDO , JLL
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