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Luxury leads the way

Overview

Hotel asset transactions are getting done and while the pace has slowed a touch, we're still optimistic for sellers such as HOT.  Asset sales are a big part of the Starwood investment thesis and to a lesser extent, Hyatt and Hilton.  While not perfect, conditions remain favorable for narrower bid/asks.

Most Lodging REIT stocks are flat to +8% on a YTD basis as of Friday's close, are within 5% to 10% of their respective 52 weeks high prices, and trading flat to +15% above their last equity issuance price.  Combined with decent balance sheets, lodging REITs are well positioned to continue to be buyers of assets from the C-Corps, namely Starwood and Hyatt. 

Upper upscale (UUP) & Luxury Transaction Trends for Q1 2014

  • Q1 2014 worldwide hotel transactions (UUP & Luxury brands) volume was close to $2.5 billion, lower than the $3.3 billion seen in Q4 2013 but slightly higher than Q1 2013's. 
  • The number of US luxury/UUP hotel transactions (where price was disclosed) was 12 in Q1 2014 - 5 less sequentially but 5 more than in Q1 2013
  • The number of non-US luxury/UUP hotel transactions (where price was disclosed) was 11 in Q1 2014 – 3 more sequentially and 4 more than in Q1 2013.
  • Relative to a two-year trailing average, US average price per key (APPK) in the UUP segment was $215k, below 6 quarter average of $266k.  This is attributable to some second/third tier city sales.
  • Luxury was the outperformer in Q1 2014.  APPK was $453k in the US and $527k internationally.  The 12 transactions were the most in a quarter since we started tracking transactions in 2010.
  • RLJ Lodging Trust was the most active in the market
  • There were several multi-asset sales in Q1 2014

Companies of note

Host Hotels

  • Sold Courtyard Nashua for $41k APPK
  • Bought Powell Hotel for $497k APPK

Marriott

  • Sold Renaissance Barcelona for $499k APPK

Hyatt

  • Sold 10 Hyatts for $201k APPK

HOTEL TRANSACTION MARKET STILL SOLID - 1

Starwood

  • Sold St. Regis Bal Harbour for $1.03m APPK
  • Sold Hotel Aloft Guadalajara Las Americas for $126k APPK

HOTEL TRANSACTION MARKET STILL SOLID - 2

Our detailed transaction database is available on request.