dense markets . This dynamic provided a much-needed boost in performance for REITs with greater exposure to leisure-focused markets , at a time when all hotel owners were starving for demand . To capitalize on this emerging trend and to continue weathering the storm , REITs are being strategically creative and intentional in driving value for their portfolios . Notably , REITs are :
• Amending existing management agreements to help lift EBITDA margins
• Identifying revenue enhancement opportunities across hotels in their portfolios
• Converting hotels to lifestyle or leisure-oriented brands
• Leaning in on JV partnerships as a way to acquire attractive assets to add to their portfolios
• Disposing of assets that no longer fit the strategic direction of their portfolios
A DEEPER DIVE INTO REIT M & A With the industry on firmer footing and a clear shift in travel preferences to leisure markets and lifestyle brands over the short-term , REITs have embraced the opportunity to right-size their portfolios and boost liquidity levels by disposing of assets .
Over the past 18 months , REITs , such as Xenia Hotels & Resorts , Park Hotels & Resorts and Ashford Hospitality Trust have been net sellers , disposing of assets situated in larger urban centers or hotels with a heavy reliance on transient business travel . Since 2020 , hotel REITs have disposed of US $ 5.6 billion worth of hotel assets , representing 37 % of all hotel sales activity during the analyzed period and making them the largest disposer of assets among all hotel owners .
Nevertheless , in tandem with recent stock pricing recovery , the pace of hotel REIT acquisition activity has accelerated . In fact , in YTD June 2021 , REITs were the acquirer on nine transactions , as compared to all of 2020 , where the buyer group was the acquirer on only six transactions .
Host Hotels & Resorts ( Host ) and Pebblebrook Hotel Trust ( Pebblebrook ) are especially active . Host is seeing improvements in RevPAR , according to a report in Nasdaq and achieved hotel-level profitability in Q1 2021 for the first time since the beginning of the pandemic , which has spurred the REIT ’ s acquisitions . Some of Host ’ s high-profile transactions this year , include the Hyatt Regency in Austin , which was acquired for US $ 161 million and the Four Seasons Resort Orlando at Walt Disney , which was acquired for US $ 610 million , according to the company ’ s recent press announcements .
While Pebblebrook has disposed of approximately US $ 545 million of hotel assets from 2020 to YTD June 2021 , the REIT will soon close on the Margaritaville Hollywood Beach Resort , which it acquired for US $ 270 million .
We expect REIT acquisition activity to continue picking up pace as the lodging industry ’ s recovery strengthens . Moreover , with the hotel debt market open , hotel REITS have access to all forms of credit , including mortgage capital , public bonds and equity . It is true that REITs will remain selective when purchasing hotel assets , but with more cash on-hand and access to the debt market , REIT acquisition activity will increase .
July / August 2021 hotelsmag . com 63