U.S. hotels: who’s buying?

CHICAGO, Dec. 11, 2018 – Hotel acquisitions have posted strong numbers and private equity has secured this year’s lion’s share. As of YTD 2018, hotel transaction volume in the United States reached $29.7 billion, more than a 25 percent year-over-year increase, with private equity groups representing 37 percent of hotel acquisitions in the United States, or $11 billion. This compares to 30 percent ($7.1 billion) for all of 2017.

According to JLL Hotels & Hospitality, private equity groups have more pockets of capital than they’ve had in the past, allowing them to pursue a wider variety of investment strategies related to hospitality, ranging from core plus to opportunistic plays. Additionally, private equity hotel buyers are focusing on acquiring complex full service hotels and portfolios. 

While private equity may currently be the most dominant buyer, there are several other groups who are also demonstrating a strong appetite for hospitality product. Development companies have become more active in 2018, accounting for 13 percent ($4.0 billion) of YTD 2018 hotel acquisitions, compared to 10 percent for all of 2017. Additionally, offshore activity has observed a slight increase: YTD 2018 figures show offshore capital is equal to $4.0 billion of U.S. hotel acquisitions, compared to $3.6 billion over the same period in 2017.

Factors contributing to the uptick in investment activity, particularly from private equity, include:

• A strong economy, including the lowest unemployment rate in half a century and third quarter annualized real GDP growth clocking in at 3.5 percent, above the economy’s long-run potential of two percent growth.
• Continued leisure and corporate travel demand, with transient room night demand recording growth of nearly four percent as of August 2018 and group demand growing at 1.2 percent on a 12-month moving average basis.
• The hotel industry attracting more nontraditional and general real estate investors, in addition to traditional hotel investors.