NEW ORLEANS-Two major hotel sales in the past month reflect investors’ confidence in the city’s long-term growth despite slowly recovering occupancy rates. Local experts predict both buyers are in the opportunistic purchases for the long term.
In late December 2007, Chicago-based Strategic Hotels & Resorts Inc. sold the 1,184-room Hyatt Regency New Orleans at 500 Poydras St. to New Orleans buyer, Poydras Properties Hotel Holdings Co. LLC for $32 million. Two weeks later, Ashford Hospitality Trust Inc. of Dallas closed on its sale of the 494-room JW Marriott New Orleans at 614 Canal St. to an unidentified buyer for $67.5 million. The hotels are a half mile apart, with the Hyatt Regency still shuttered due to damage from Hurricane Katrina in 2005.
“Many hotels are seeing drops in occupancy numbers. Following Katrina, many of the hotels, especially Downtown, were home to recovery workers as well as people displaced by the hurricane. But as that’s gone away, occupancies have dropped,” says Dorraine Lallani, senior vice president with Jones Lang LaSalle Hotels’ Houston office.
Lallani wasn’t involved in the J.W. Marriott sale, but regularly handles deals in New Orleans. She says overall it’s a difficult time to sell hotels in the area. “With the credit crunch and lenders tightening up underwriting standards in response, lenders don’t want to look at New Orleans,” she tells GlobeSt.com.
EconSouth, a publication released by the Federal Reserve Bank of Atlanta, supported Lallani’s remarks, noting that New Orleans’ travel and hospitality industries will likely not reach pre-Katrina figures until 2010. Although hotel occupancy rates topped 90% during Mardi Gras 2007much of the area is experiencing 60% to 65% occupancy rates, according to another local expert.
Lallani says the JW Marriott’s buyer is likely taking a long-term view of New Orleans and believes in the future of the area. The same could be said of the Hyatt transaction. “If the buyer purchased it at what might considered a reasonable price, and is prepared to be there for the long haul, the deal could make sense,” she adds.