The hotel industry will be hard-pressed to top 2007 in terms of record per-room sale prices, which ran counter to the revenue those rooms generated. Yet experts believe hotel sales are likely to surge ahead through the remainder of 2008, even if the number of rooms sold doesn’t keep pace with last year.

“The volume in ’08 hasn’t been the same as in ’07,” says Daniel Lesser, senior managing director-industry leader, valuation and advisory services-hospitality and gaming group of CB Richard Ellis in New York City. He anticipates the number of transactions valued more than $10 million during the first quarter to be fewer than those for the same period last year, when he completes his upcoming quarterly report.

Lesser previously wrote in a research report for that nearly $60 billion in hotel sales occurred in 2007, breaking the record for a fourth consecutive year. While availability of capital is tighter this year, he notes that foreign investment in US hotels is increasing and is still considered safe.

Hotel Brokers International, in its latest report released April 8, points to a record average price of $117,000 per room sold last year, up from $110,000 in 2006 and well more than the decade low of $52,000 in 2000. Brandt Niehaus, president of the Kansas City, MO-based firm, says the higher pricing reflects strong revenue per available room. RevPAR measured 5.7% higher in 2007 after peaking above 9% in 2006, according to Smith Travel Research.

“Despite disruptions in the capital markets and talk of recession, we anticipate 2008 will be another very active year for hotel real estate,” Niehaus stated in the HBI report. “Supply growth remains constrained and the economy is expected to pick up in the second half or early next year, which will have a positive impact on hotel operations.

“Sellers who don’t want to wait for the cycle to move upward or to further invest in their properties will still be able to obtain attractive prices, and the forecasted rebound offers upside for buyers, a win-win situation,” he continued. “Over most of the year, buyers will likely have a slight edge, but pricing will remain strong.”

However, Lesser points out that many hotel owners-in particular chains posting record profits last year-may be less inclined to sell their properties, which could limit the supply of rooms available for sale. That profitability, he says, likely neutralized any year-over-year increases in cap rates, which mostly remained in the low 9% range throughout 2007.

“I haven’t seen any empirical evidence that points to an erosion of US hotel asset values,” Lesser says. He adds that overseas investors still view American hotel properties as a bargain relative to other gateway cities around the world.

HBI’s report states that a lack of available inventory helped drive up room prices across the board last year. For example, sales of mid-market hotels without food and beverage service declined over the year from 280 to 222 properties, though prices jumped 22% to $72,000 per key. On the other end of the spectrum, luxury hotel sales declined but the average price per room rose 8% to $479,000.

Hotel developers are advancing plans to develop more rooms, as evidenced by last week’s announcement by Starwood Hotels & Resorts Worldwide Inc. that it aims to open 54 Sheraton hotels with 20,000 new rooms by 2009. Almost 70 Sheraton properties are expected to open by the end of 2010–with 30 including spas–in North America, Europe, the Middle East and Asia.

Meanwhile, some hotel property owners are looking to sell their sites before the rooms are built. In Orlando, FL, Sperry Van Ness is marketing 41 acres on International Drive with entitlements in place for a new InterContinental Hotel & Resort. The asking price: $127 million.

“It’s certainly realistically priced,” says Natvar Nana, SVN national hospitality advisor in Orlando. “A project of this nature takes a long time to get the proper approvals.”

Plans for InterContinental’s largest project, called Palazzo Del Lago, include 1,548 hotel rooms plus 800 condominium or timeshare units. Nana says the value of the property, which is being marketed globally, is enhanced by its proximity to Orlando’s newly expanded convention center and constantly enhanced theme parks.

How many potential buyers Nana hears from remains to be seen, however. He says he has already noticed a slowdown in deal velocity through the first quarter of this year and doesn’t see it picking up for a while to come. “It’s going to take a long time before we reach the boom-boom years of 2006 and ’07 again,” he says.

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