DEVELOPMENT
NEW CAPITAL , STRATEGIES
TARGETING HOSPITALITY
Contributed BY MANAGING DIRECTOR DAN MACDONNELL , LOS ANGELES , AND VICE PRESIDENT BRAD HOBAN , TAMPA , FLORIDA , HVS CAPITAL
Given the significant traction in distribution of the COVID-19 vaccines throughout the United States and general international travel restrictions , leisure travel has begun to recover in 2021 and is expected to continue increasing , with Americans seeking so-called “ revenge travel ” to a domestic getaway .
Business travel is also beginning to show signs of recovery , and some group business related to conference attendance is returning .
While the lodging recovery is still rather disjointed throughout the U . S ., emerging optimism has led to the restart of hotel construction and a marked increase in trading activity through the second quarter of 2021 , particularly in MSAs that have demonstrated strong RevPAR recovery over the last six months . The table below illustrates U . S . hotel RevPAR by region for the year-to-date period through June 2020 and 2021 . Overall , the U . S . has started to recover , with RevPAR growth range from 13 % in the Pacific region to 45 % in the East South-Central region , and an overall median RevPAR increase of 30 %.
Commensurate with the resurgence in transaction volume and increasingly favorable sentiment of hotel investors , financing is becoming more available . Smaller transactions are continuing to be financed through local and regional banks , in many instances supported by
U . S . RevPAR By Region — YTD June Source : STR - June 2021 Lodging Review
Pacific
Mountain
W . South Central
W . North Central
E . South Central
E . North Central
South Atlantic
Middle Atlantic
New England
2021 2020
$ 30
$ 33
government-backed programs ( USDA , SBA7a , and SBA 504 ). Mid-to-large hotel transactions are benefitting from the return of traditional forms of financing , but are typically being financed at lower loan to values ( LTVs ) or a higher cost of capital given the need for subordinate debt . Conduit financing is returning , but remains limited by suppressed performance over the trailing-12-month period .
Subsequent to the COVID-19 pandemic , several opportunistic funds were raised , and existing funds grew as investors hoped to buy distressed assets at significant discounts , typically 15 % to 35 % below 2019
$ 39
$ 37
$ 41
$ 42
$ 41
$ 51 $ 50
$ 48
$ 54
$ 54 $ 56
$ 56
$ 62
$ 66
$ 74
$ 73