NATIONAL REPORT — From the sale of the Arizona Biltmore for $705 million earlier this year to the sale of the Hyatt Regency Orlando for over a billion dollars a few weeks ago, there is no doubt that large hotel transactions are on the rise.
According to a new report from JLL, there is every reason to believe that more of these spectacular transactions are to come throughout the rest of 2024.
JLL said transaction volume for single-property deals over $200 million through the end of August was up 59% compared to the same period in 2023, with a total of $4 billion recorded so far. This activity also represents a 15% increase from 2019 levels. In fact, single-property deals of this size in hotel transactions are now at their highest levels in eight years.
These large transactions take place in high-growth markets with high barriers to entry and are predominantly financed through CMBS/SASB loans, says Ophelia Makis, researcher at JLL Hotels and Retail Capital Markets.
“The volume of CMBS hotel issuance in the first half of 2024 has already exceeded the total for all of 2023, at $10.7 billion,” Makis said. “We expect further issuance to occur later in the year in parallel with the increase in high-priced transactions, with this capital likely to flow toward hotels in markets with high barriers to entry that have different demand drivers.”
The JLL report also points out that there is still plenty of potential at present and therefore “there is an increased appetite for high-quality, large transactions, particularly for luxury hotels in growth markets and city centres”.
JLL listed several notable large transaction completions this year, including the recent sale of the Hyatt Regency Orlando for $1.1 billion, the sale of the Arizona Biltmore for $705 million, the sale of the Ritz-Carlton Key Biscayne for over $400 million, Larry Ellison’s purchase of the Eau Palm Beach Resort & Spa, the sale of 1 Hotel Central Park New York for $265 million and the sale of the Hyatt Regency San Antonio for $230 million.
JLL also highlighted the significance of Blackstone’s sale of Turtle Bay Resort in Oahu for $725 million. That resort will be converted into a Ritz-Carlton, with Marriott contributing a record $45 million.
Makis said the Federal Reserve’s signal that a rate cut is imminent in September is a “significant positive change” that should generate more activity. But it may not translate into more billion-dollar transactions.
“(The rate cut) should boost transaction activity in the short to medium term,” Makis said. “However, for large transactions, it is important to note that while rate cuts can be helpful, there are only a handful of buyers who can take on transactions of this size.”
