Q1 2018 US Lodging Market Update, Strong Fundamentals

The US lodging industry continues to enjoy the benefits of strong economic fundamentals as metrics on spending, global trade, and various manufacturing indices signal that America’s economy is poised for further growth.  The US labor market continues to generate new jobs and further optimism is evident given the recently passed Tax Cuts and Jobs Act.  US demand for leisure and business (transient, group meeting, and convention) travel accommodations has continued to rise with growth in demand outpacing supply through the first quarter of 2018. Demand for transient accommodations in several markets (such as Houston and South Florida) has been enhanced by continued natural disaster-induced demand and strong resort performance driven by in part by closures and devastation still evident in the Caribbean.

The LW Hospitality Advisors (LWHA) Q1 2018 Major U.S. Hotel Sales Survey includes 57 single asset sale transactions over $10 million, none of which are part of a portfolio. These transactions totaled roughly $4.3 billion and included approximately 13,100 hotel rooms with an average sale price per room of $332,000. While the data speaks for itself, I feel it is important to note that the numbers are skewed by inclusion of the $1.3 billion trade ($4.3 million per room) of the Sands Casino Bethlehem, and the $95 million sale ($2.375 per room) of the Soho House Chicago.  Net of the two trades (which include substantial revenue from non-rooms related sources) results in total Q1 2018 U.S. transaction volume of roughly $2.9 billion and approximately 12,700 hotel rooms with an average sale price per room of $231,000.  By comparison, the LWHA Q1 2017 Major U.S. Hotel Sales Survey identified 54 transactions totaling roughly $3.6 billion including 13,200 hotel rooms with an average sale price per room of nearly $273,000.  Eleven major Q1 2018 hotel sales occurred in Florida, followed by 7 in California, and 5 each in Maryland and New York.