Poised to release the survey in mid-December, Kristina Paider, senior vice president of research and marketing for locally based Jones Lang LaSalle Hotels, says there is expected to be $45 billion in US hotel transactions by year's end, a 27% increase from last year's $35.3 billion. The increase is largely due to nine "mega-deal" portfolio transactions, which accounted for a total of $23 billion of the transactions, she says. Mega-deal transactions included the Lightstone Group acquiring Extended Stay America for $8 billion; Morgan Stanley acquiring eight properties in the Luxury CNL portfolio for $4 billion; and Ashford Hospitality acquiring the CNL hotel portfolio for $2.4 billion. One of the largest transactions in the Americas was the acquisition of the Makena Resort by Morgan Stanley Real Estate Fund V US and the Dowling Co. Inc. for $575 million.

"We are forecasting the mega deals will slow down considerably," Paider says. Part of the reason for the decrease is the current instability of the debt market. "In order to close large mega deals, sponsors will need considerably more equity [and] high quality assets," she says. In 2008, hotel transaction activity is expected to be between $25 billion and $30 billion, Paider tells GlobeSt.com.

While there will likely be an overall decrease in hotel transactions, there will be an increase in single hotel asset transactions. "2007 was the fourth consecutive year of record growth in terms of hotel sales," Paider says. The transaction volume in 2004 was $17 billion, $21 billion in 2005 and $35.3 billion in 2006. The numbers forecasted for 2008 are still high compared to 2004 and 2005, she says. Jones Lang LaSalle Hotels also is forecasting an increase in offshore investment in US hotels because of the weak US dollar.

Investors are expected to have a "flight to quality" in 2008, gravitating toward upscale and luxury hotels for investments, Paider says. About two-thirds of respondents "indicate luxury and upscale will be their asset of choice in the short-term," she adds. The same trend was reflected in the US select-service Hotel Investment Sentiment Survey, which was released earlier this month.

Paider says investors are acquiring assets at "top of their segment." The short-range outlook for positive trading performances is 25.8% with the medium-range outlook at 23.6%, according to the report. Respondents in New York City and San Francisco, which have high barriers to entry and have high occupancy rates, had the most positive short-term outlook, with New York City at 70.2% and San Francisco at 61.8%.

Instant Insights /

Hotels Survey Finds Investors' Soft Spots

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