ATLANTA –It’s not just leisure travelers who are lining up for the select service hotel breakfast buffet these days. The increase in demand from budget-conscious vacationers, who seek economical lodging, has propelled select service hotels values and enticed yield-seeking investors, according to Jones Lang LaSalle’s recent analysis of hotel demand. Decreased demand for extra amenities and luxurious services by leisure travelers in the United States has resulted in a 55 percent increase in select-service hotel accommodations, according to MMGY Global’s 2013 Portrait of American Travelers. Watch the video here to learn more: http://bit.ly/1gkPyet
Jones Lang LaSalle’s Hotel & Hospitalityexperts point to five key highlights affecting the market:
- Select service hotel trades spiked 145 percent in the first eight months of 2013.
- The segment reached $4.62 billion compared with a mere $1.89 billion in 2012.
- The bulk of the select service trades transacted, a whopping 63 percent, were portfolio acquisitions.
- Hotel occupancy in upscale chains exceeded the 2006 pre-recession peak.
- Boston, , Denver, Houston and Los Angeles ranked as the top markets for select service hotel trades.
“Select service hotels displayed resiliency during the downturn, and the investment community took notice. Cap rates have declined nearly 100 basis points (bps) and large select service portfolios are trading in the high seven percent cap rate range and individual properties in the low eight percent range,” said Al Calhoun, Managing Director of Jones Lang LaSalle’s Hotels & Hospitality Group. “The number of bids we’ve received on premium-branded hotel portfolios has increased two-fold; there is desire and demand in the market right now for these assets.”
According to Jones Lang LaSalle’s research, this year private equity funds have tripled their investment into select service hotels as they pursued mixed-bag portfolios that offered value-add opportunities. Additionally, REITs doubled their investment dollars into the sector and chased after premium-branded assets in densely populated markets.
“There is an art to knowing when to buy, and when to sell. If investors time it right, they’ll be able to maximize the cycle and their proceeds,” said Mark Fair, Managing Director of Jones Lang LaSalle’s Hotels & Hospitality Group. "The first eight months of 2013 were robust with select service trades, but during the back half of the year the market will take a deep breath. It’s likely a tremendous amount of select service product will hit the market in early 2014, as interest rates are expected to remain stable through the remainder of 2013, with increasing RevPAR rates, competition and yields.”
Select service hotel rooms make up more than half of all U.S. hotel rooms, with more than 2.8 million in operation. Although the segment is seeing nominal supply growth of two percent, with approximately 57,000 rooms in the pipeline, the demand continues to amplify with rising popularity among U.S. travelers.
Jones Lang LaSalle’s Hotels &Hospitality Group serves as the hospitality industry’s global leader in real estate services for luxury, upscale, select-service and budget hotels; timeshare and fractional ownership properties; convention centers; mixed-use developments and other hospitality properties. The firm’s more than 265 dedicated hospitality experts partner with investors and owner/operators around the globe to support and shape investment strategies that deliver maximum value throughout the entire lifecycle of an asset. In the last five years, the team completed more transactions than any other hospitality real estate advisor in the world totaling nearly $25 billion, while also completing approximately 4,000 advisory and valuation assignments. The group’s hotels and hospitality specialists provide independent and expert advice to clients, backed by industry-leading research.
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Jones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 2.6 billion square feet and completed $63 billion in sales, acquisitions and finance transactions in 2012. Its investment management business, LaSalle Investment Management, has $46.3 billion of real estate assets under management. For further information, visit www.jll.com. For further information, please visit www.jll.com