COVID , private equity was the largest acquirer of hotel assets , accounting for an average of 35 % of annual liquidity . With an average lifespan of fiveto-seven years , many of these funds are approaching their expiration date and , as such , will need to be liquidated and the assets sold . Look for the nearly $ 22 billion in hotel fund-life expirations to further catalyze transaction activity over the medium-term .
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challenging to refinance and may be forced to sell their assets . Moreover , rising interest rates have caused the cost of interest rate caps to increase substantially ( most floating rate lenders require interest rate caps ). As a result , some owners could be forced to sell .
2 . PE FUNDS NEAR THEIR LIFE EXPIRATION DATE In the five years prior to
3 . INTL . TRAVEL RETURN / ACCELERATION OF GROUP & CORP . International travel and foreign hotel investment have been largely absent over the past three years driven by widespread border closures . As travel restrictions have eased , particularly with China ’ s recent reopening , international tourism is expected to rebound , which will likely stimulate further hotel investment and increase demand for hotel accommodations , particularly in gateway urban markets , such as Boston , Miami and New York . This will impact group and business travel the most , two segments that have been slower to recover thus far . This in turn should provide renewed investor optimism for hotels in group and corporateheavy markets and accelerate transaction activity . Look for increased investment in big-box and meetings-oriented hotels , evidenced by the $ 835-million sale of the Diplomat Beach Resort in Florida in February
LOOK FOR THE NEARLY $ 22 BILLION IN HOTEL FUND-LIFE EXPIRATIONS TO FURTHER CATALYZE TRANSACTION ACTIVITY OVER THE MEDIUM-TERM
2023 , the third-largest U . S . single-asset transaction on record .
Though ongoing macroeconomic headwinds will suppress short-term transaction activity , there are multiple catalysts on the horizon that should spur an increase in U . S . hotel transaction velocity over the medium-term . Rising debt costs , fund-life expirations , impending interest rate cap renewals , a high volume of loans reaching maturity and depleted
– OPHELIA MAKIS , JLL
Ophelia Makis , sr . research analyst , capital markets , hotels & hospitality group , JLL
CapEx reserves with PIPs likely being reinstituted should all present an opportunity for investors to acquire quality hotel assets in late 2023 .
As international travel rebounds and group business resumes , demand for top gateway markets and big-box hotels is expected to increase . Look for well-capitalized buyers who are less reliant on leverage to have an advantage , particularly as capital market dislocation persists .
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