A Surprising Stat About Orlando's Hotel Market

ORLANDO—Wondering what's really going on in Orlando's hotel market? HREC Investment Advisors just issued an in-depth study of hotel transactions in the Greater Orlando market for 2015.

Over 500 hotels in Orange, Osceola, Seminole, Polk and Lake Counties are included in the report. According to the study, 68 hotels changed ownership in 2015. That's up from 45 properties in 2014. Aggregate sales volume in 2015 was $2.4 billion versus $485 million in 2014.

“The unprecedented volume of sales in the Orlando area in 2015 solidifies two primary trends,” says Paul Sexton, head of HREC's Orlando office. “The first—and this will come as a surprise to many—is that we are increasingly viewed as a safe haven for investors at the luxury end of the market. The second—and this will come as a relief to many—is that, with over 50 hotel sales in our least dynamic submarkets since the beginning of the economic recovery, we are slowly, but surely, seeing a healthy transformation at the lower end of the market.”

With $1.8 billion in volume, HREC reports portfolio-corporate sales dominated single-asset sales of $596 million. Average transaction size for single-asset sales in 2015 was $11.4 million versus $7.2 million in 2014. Median single-asset transaction size in 2015 was $6.4 million versus $3.7 million in 2014.

The average price per guestroom for single-asset transactions in 2015 was $56,400 versus $42,700 in 2014. Demand for hotel rooms in the market in 2015 grew by 6% over 2014, clearly outpacing supply growth of less than 1.5%. Occupancy for the region, as a result, reached 77%. That's up from 73.7% in 2014. At the same time, managers were able to push the region's average daily room rate to $112. That's up nearly 4% year-over-year.

“Greater Orlando continues to be one of the most dynamic hotel markets in the country,” says Scott Stephens, HREC's COO and Southeast practice leader. “No other market in the nation is experiencing the level of investment in new demand generators and in the renewal of established attractions than is the Central Florida market. Because local governments continue to increase the tourism inflow bandwidth with transformational airport and roadway improvements, we believe that our nation's number one tourism destination still has a long runway ahead of it.”

The top three transactions by sales price were: J.W. Marriott + Ritz Carlton Grand Lakes Portfolio at $980 million; Hilton + Waldorf Astoria Orlando Bonnet Creek Portfolio at $760 million; and Buena Vista Palace at $96 million. With 11 transactions, Kissimmee East was, once again, the most active submarket in terms of the number of hotels that changed ownership. However, HREC reports, the International Drive submarket—which surpassed the Lake Buena Vista submarket—was the most active in terms of dollar volume with $217 million.

“Despite continued hotel development at Universal, additions to supply remains well within tolerance levels,” Sexton says. “More specifically, new guestroom supply has grown by an average of less than 1% per year since 2011, after accounting for both the development of new hotels and the closure of older hotels.”

In 2015, 12 hotels—accounting for $1.8 billion in sales volume—sold as part of a corporate-portfolio transaction. That's the highest level of corporate-portfolio sales during this cycle.

Rich Lillis, an executive vice president with Colliers International South Florida who advises clients on hotel and resort investment sales, tells GlobeSt.com investors should also keep entering the market. “We expect Florida hotel transaction activity will remain strong or even accelerate in 2016,” he says, “as capital markets are supporting buyers, while hotel owners look to sell in order to realize gains made in hotel values and to recycle capital.”

Want to learn about two tech trends changing the hotel market? Check out my recent column.

ORLANDO—Wondering what's really going on in Orlando's hotel market? HREC Investment Advisors just issued an in-depth study of hotel transactions in the Greater Orlando market for 2015.

Over 500 hotels in Orange, Osceola, Seminole, Polk and Lake Counties are included in the report. According to the study, 68 hotels changed ownership in 2015. That's up from 45 properties in 2014. Aggregate sales volume in 2015 was $2.4 billion versus $485 million in 2014.

“The unprecedented volume of sales in the Orlando area in 2015 solidifies two primary trends,” says Paul Sexton, head of HREC's Orlando office. “The first—and this will come as a surprise to many—is that we are increasingly viewed as a safe haven for investors at the luxury end of the market. The second—and this will come as a relief to many—is that, with over 50 hotel sales in our least dynamic submarkets since the beginning of the economic recovery, we are slowly, but surely, seeing a healthy transformation at the lower end of the market.”

With $1.8 billion in volume, HREC reports portfolio-corporate sales dominated single-asset sales of $596 million. Average transaction size for single-asset sales in 2015 was $11.4 million versus $7.2 million in 2014. Median single-asset transaction size in 2015 was $6.4 million versus $3.7 million in 2014.

The average price per guestroom for single-asset transactions in 2015 was $56,400 versus $42,700 in 2014. Demand for hotel rooms in the market in 2015 grew by 6% over 2014, clearly outpacing supply growth of less than 1.5%. Occupancy for the region, as a result, reached 77%. That's up from 73.7% in 2014. At the same time, managers were able to push the region's average daily room rate to $112. That's up nearly 4% year-over-year.

“Greater Orlando continues to be one of the most dynamic hotel markets in the country,” says Scott Stephens, HREC's COO and Southeast practice leader. “No other market in the nation is experiencing the level of investment in new demand generators and in the renewal of established attractions than is the Central Florida market. Because local governments continue to increase the tourism inflow bandwidth with transformational airport and roadway improvements, we believe that our nation's number one tourism destination still has a long runway ahead of it.”

The top three transactions by sales price were: J.W. Marriott + Ritz Carlton Grand Lakes Portfolio at $980 million; Hilton + Waldorf Astoria Orlando Bonnet Creek Portfolio at $760 million; and Buena Vista Palace at $96 million. With 11 transactions, Kissimmee East was, once again, the most active submarket in terms of the number of hotels that changed ownership. However, HREC reports, the International Drive submarket—which surpassed the Lake Buena Vista submarket—was the most active in terms of dollar volume with $217 million.

“Despite continued hotel development at Universal, additions to supply remains well within tolerance levels,” Sexton says. “More specifically, new guestroom supply has grown by an average of less than 1% per year since 2011, after accounting for both the development of new hotels and the closure of older hotels.”

In 2015, 12 hotels—accounting for $1.8 billion in sales volume—sold as part of a corporate-portfolio transaction. That's the highest level of corporate-portfolio sales during this cycle.

Rich Lillis, an executive vice president with Colliers International South Florida who advises clients on hotel and resort investment sales, tells GlobeSt.com investors should also keep entering the market. “We expect Florida hotel transaction activity will remain strong or even accelerate in 2016,” he says, “as capital markets are supporting buyers, while hotel owners look to sell in order to realize gains made in hotel values and to recycle capital.”

Want to learn about two tech trends changing the hotel market? Check out my recent column.