BTHE THIRST FROM THE CAPITAL MARKETS ALLOWED US TO DRIVE DEEP COMPETITION OFTEN GOING TO MULTIPLE BIDDING ROUNDS . SIMPLY PUT – THE LEVERAGE PENDULUM HAD CLEARLY SWUNG HEAVY FOR THE BENEFIT OF THE SELLER .
– KEVIN MALLORY
many owners to maintain their investments . As we made our way deeper into the pandemic , demand for investment product did not dissipate , and consumer demand started to manifest with clear trends . Resorts were one of two primary segments to benefit from these early trends . The resorts that did best had obvious characteristics : easy to drive to , Sun Belt locations , newer , and luxury positioning .
The most successful had the ability to pivot distribution channels away from group and business and focus entirely on leisure ( and ‘ bleisure ’). The consumer , flush with pent up savings and a desire to get out , became a force that quickly outgrew the segment ’ s ability to satisfy demand – first on weekends and then throughout the week as bleisure and remote working became status quo .
OPERATING FUNDAMENTALS Led by the recovery in leisure , resorts in the United States early on – and with a J-curve trajectory – led the way in sector fundamentals . Miami , Virginia Beach , Southern Florida , Orlando , Napa , Charleston , Savannah , and even more remote locations in Colorado , Wyoming , and the Great Lakes , became regional and then national destinations .
Based on data we collect , resorts have outperformed 2019 levels in both revenue and profitability . Revenue was driven by ADR growth that soared 43 % over prepandemic levels , while occupancy remained below prior peaks . Our database indicates resort revenue and profits ended 2021 at 102 % and 108 % of 2019 levels , respectively .
CAPITAL MARKETS There is nothing that the capital markets like better than a positive outlook . This , coupled with capital supply ( both debt and equity ) that could not be satisfied , and was / is yield starved , drove interest in the sector and the resort segment to new highs .
As we and our peers brought the right product to market , we experienced high bid depths from both debt and equity . On one asset alone , we received over US $ 8 billion in qualified bids – yes , you read that right .
On the debt side , almost 90 % of our transactions occurred with different lenders . The thirst from the capital markets allowed us to drive deep competition , often going to multiple bidding rounds . Simply put – the leverage pendulum had clearly swung heavily for the benefit of the seller .
TRANSACTIONS Not all resorts are created equal , however . Capital likes big , newer , drive-to , and sunbelt / coastal properties . Add Napa , California , and top ski destinations as well .
Today , top properties are trading north of US $ 1 million and US $ 2 million per unit with some regularity . Transactions over US $ 300 million are common . Transactions over US $ 500 million do not surprise .
Entry yields are low and sub-5 % is not unusual with stabilized yields perhaps making their way toward 6 % to 7.5 %.
Real estate fund manager Alcion Ventures in November 2021 sold the 85-room Four Seasons hotel in Napa Valley ’ s Calistoga , California , for US $ 175 million ( more than US $ 2 million per key ) to Sunstone Hotel Investors .