Market Insight May 2018 (10 Lodging Investment Trends)

HOTEL INVESTMENT Market Insight MAY 2018

10 Lodging Investment Trends and Challenges in 2018

The Lodging Industry Investment Council (LIIC) released its annual survey of the think tank’s members and de- veloped a list from the results that highlight major hotel investment opportunities and challenges for the coming year. More than half of the hotel investors surveyed (53 percent) reported successfully purchasing a hotel in the last 12 months and 40 percent currently having a hotel acquisition candidate under a purchase and sale con- tract. Moreover, 93 percent say they hope to buy lodging assets over the next year and 75 percent plan to sell a hotel over the next 24 months. 1. Fluid Hotel Transaction Market Overall, the 2018 LIIC Survey indicates “business as usu- al,” and the big picture trend is that the current market is similar to 2017. On the positive side, the hotel transac- tion market is fluid—hotel assets are trading. Buyers and sellers are actively using solid hotel debt availability in a variety of forms to complete transactions. Private equity and listed REITs are predicted to dominate the purchase of upscale to luxury hotels, while small private buyers and regional owner/operators are projected to dominate the purchase of economy to upper-midscale hotels. 2. Tax Reform’s Benefits to Owners How will the recently passed tax reform bill affect hotel owners? Most investors (67 percent) say positively, with 41 percent expecting an increase in GDP growth and 28 percent predicting a correlated increase in business travel. For the next 24 months, 70 percent believe that the economy will continue to trend upward. 3. Hotel Property Values Flat or Increasing Slightly Over the next 12 months, 41 percent of hotel investors anticipate that lodging real estate values will be flat in comparison to 2017. However, the same size group (41 percent) forecast a slight increase in values (up to 5 per- cent). Buyers’ favorite investment sector targets include upscale (37 percent) and upper-upscale (37 percent). Below are 10 trends and challenges that hotel investors expect in the next year.

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