Increased turmoil in the debt and equity markets wasn’t enough to empty U.S. hotels during the Labor Day weekend. Nor were these trying credit conditions enough to force hotel lenders onto the sidelines.
Fundamentals over the long weekend were encouraging. According to PricewaterhouseCoopers, national occupancy should register 69.1% during this past holiday weekend. While that was just a tad higher than the 69% occupancy rate achieved during Labor Day weekend 2006, it would stand as a record occupancy rate for that period.
Occupancy rates, however, may have peaked, reports PricewaterhouseCoopers. One reason: A flurry of new hotel projects is expected to hit the national market during the next 12 months. Manhattan-based hotel finance executive Mark Gordon says that lenders are still bullish on some new hotel projects, which could add to the existing supply of hotels. The fact that financing is even available for new projects is somewhat impressive given the ongoing credit crunch.
“We’re seeing deals get done despite this period of illiquidity,” says Gordon, who is head of the U.S. hotel practice at Manhattan-based real estate investment bank Cushman & Wakefield Sonnenblick Goldman.
After a busy August, Gordon expects September to bring more deals. Gordon closed two large hotel sales in August. One of those deals was the Fort Myers, Fla.-based Sanibel Harbor Resort & Spa, which fetched $130 million last month. According to the banker, more than 75 interested parties were competing for the waterfront resort property. Columbia Sussex, a private hotel investment firm based in Kentucky, won the bidding.
Gordon is currently working on financing three hotel deals in New York City and Boston. One of the New York City deals involves a $100 million construction loan for a new hotel. While he’s unable to discuss these deals because they haven’t closed, he says that all of them have similar attributes: “These are strong sponsors behind these deals, and that makes a huge difference between getting a deal done or not.”