Debt Funds Increase Liquidity for Hotel Product

“I wish I could tell you that there was going to be a huge increases in transactions in 2018, but we don’t think that is going to be the case,” Mark Wynne Smith, global CEO of JLL-Hotels, said at ALIS The Numbers: What We Are Dealing With and Where Are We Headed panel. Smith gave forecast of hotel transaction volume this year, and why he expects transactions to remain flat. He also gave some insight into capital markets activity this year for hotels. “We think there is going to be roughly the same as what we saw in 2017, which is about $24 billion of hotels transacted. This year, we had about 40% single assets. We will probably see about 30% this year. We just have less portfolios coming through.”

As a result, many buyers are seeking capital markets solutions rather than trading into other asset classes. “Our clients are now seeking capital solutions rather than pure exits,” said Smith. “We are having increased conversations around recaps and changing of partners. The traditional exit and buy into the next product is going to be reducing significantly.”

Smith says that difficulty reinvesting is one of the reasons transaction volume is going to remain low. “If you sell an asset today, the cost of going back in is highly likely to be getting a lower return on equity invested. There is generally less product around for that reason, so that is going to hold back the total volume,” he said.