The Wharf in Washington , D . C ., a city where demand mix goes well beyond government business .
by 13 %, propelled by robust leisure travel and resurfacing business and group demand . Resultantly , the outlook for hotel investment over the medium-term is optimistic with multiple catalysts on the horizon to drive further opportunities for acquisitions , including owners feeling financial pressure from rising CapEx needs , $ 100 billion in impending loan maturities in 2023 alone and interest rate cap renewals . Moreover , private equity funds will need to dispose of $ 4.8 billion in remaining assets reaching fund-life expiration over the next four years . Expect investment to pick up in response , mainly in the backhalf of 2023 with a significant amount of dry powder on hand , as evidenced by Blackstone ’ s recent announcement of its largest-ever real estate fund of $ 30.4 billion , which includes an allocation for the hotel industry .
URBAN RENEWAL Hotel assets on opposite ends of the spectrum have emerged as most appealing for investors : irreplaceable luxury hotels and select-service assets . Investors have been gravitating toward these high-conviction assets due to their strong performance and positive , long-term growth catalysts . Select-service hotels have historically been differentiated by their resilience to economic disruptions , evolved and diverse traveler base and strong operating performance . Moreover , investors face less of a challenge in closing smaller-cheque size deals amid heightened volatility in the debt markets . Resultantly , in Q1 2023 , select-service hotels represented the highest proportion of total single-asset hotel trades at 84 %. On the other side of the spectrum , investors are also gravitating toward luxury hotels . This segment has commanded elevated rates post-COVID in tandem with strong luxury demand stemming from growing wealth around the world . It ’ s no surprise that Q1 2023 observed record-high pricing in full-service hotels , driven by two $ 1-millionplus-per-key transactions and elevated luxury hotel liquidity .
Investors are also increasingly attracted to urban markets that offer long-term asset value preservation with a diverse demand mix and long-term consistency in performance , such as New York , Washington D . C ., and Boston . In Q1 2023 , all market types showed a full recovery compared to 2019 , with urban markets showing the largest year-over-year growth . The improvement in urban hotel performance , coupled with discounted pricing ( average price per key down 10.5 % from 2019 levels in Q1 2023 ), has translated to a renewed investor optimism in these markets . With expectations for a further surge in group and corporate demand
HOTEL ASSETS ON OPPOSITE ENDS OF THE SPECTRUM HAVE EMERGED AS MOST APPEALING FOR INVESTORS : IRREPLACEABLE LUXURY HOTELS AND SELECT-SERVICE ASSETS
– OPHELIA MAKIS , SR . RESEARCH ANALYST , CAPITAL MARKETS , JLL HOTELS & HOSPITALITY GROUP along with the resumption international travel , following China ’ s reopening of its international borders , this long-term growth opportunity is likely to result in an uptrend in urban hotel liquidity over the medium-term .
FINAL TAKE The U . S . hotel industry has shown remarkable resilience in the face of numerous challenges that have arisen in the past few years , with RevPAR expected to remain above 2019 as leisure demand remains robust , group and corporate reemerge and international demand begins to return . The industry has continued to attract investment dollars , with near recordbreaking levels in 2021 and 2022 . While investment momentum slowed in Q1 2023 , it remains relatively in line with pre-COVID averages . Investors are gravitating toward luxury and select-service hotels with renewed optimism for urban markets , which are expected to continue to be an attractive investment opportunity for the foreseeable future .
Jul / Aug 2023 hotelsmag . com 51