How Long Will Hotel Market Stay White Hot?

MIAMI—Sales of hotels are red-hot in Florida and around the Southeast, with institutional investors driving much of the demand. The hot market is a function of how well hotels are doing, which in turn is driven by tourism and the economy in general.

So what does all this mean for investors looking for lodging properties? And how long will this level of activity last?

GlobeSt.com talked to Rich Lillis, an executive vice president with Colliers International South Florida who advises clients on hotel and resort investment sales, to get some answers. Rich began his career as a front desk clerk at The Plaza Hotel in New York City. He went on to work for Marriott, moving up to become a hotel general manager, and then transitioned into real estate. He has been advising clients on hotel transactions since 2001. 

“Hotels are an attractive alternative to traditional investments, such as securities or fixed income, because they can provide higher returns,” Lillis tells GlobeSt.com. “This is also true when comparing hospitality investments to other commercial properties, such as office or multifamily.”

As Lillis sees it, Florida markets are especially attractive to hotel investors for multiple reasons. Florida, for example, has 100 million visitors per year, robust hotel performance, and high barriers to entry in many markets. 

Hotel investors broadly fall into four categories: private investors, including regional owner-operators and hotel companies; institutional investors, including private equity and hedge funds; publicly traded C-corps and REITS; and foreign investors. Lillis notes banks and other lenders are also actively supporting hotel acquisitions and new development. 

“Investors understand that hotel revenues mimic the economy—during economic growth, room rates rise quickly, while performance is quickly affected during an economic downturn,” Lillis says. “Over the past six years, we have seen a steady increase in hotel performance.”