hotel valuation and transaction trends for the u.s. …calistoga ranch, napa valley, ca $1,100,000...
TRANSCRIPT
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Hotel Valuation and Transaction Trends for the U.S. Lodging Industry
June 2014
Steve Rushmore, MAI, FRICS, CHA
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Value Trend for a Typical U.S. Hotel
2004 2005 2006
Value Per Room
Percent Change 28% 26% 21%
2007 2008 2009
Value Per Room
Percent Change -4% -15% -31%
Source: HVS/STR Hotel Valuation Index
2014 2015 2016
Value Per Room $122,000 $135,000 $142,000
Percent Change 13% 11% 5%
2017 2018
$147,000 $148,000
4% 0%
2010 2011 2012 2013
Value Per Room $65,000 $78,000 $94,000
Percent Change
$108,000
Values peaked
in 2006
Values bottomed out
in 2009
Values recovered to
2006 peak level
Values
increase at a
slowing rate
21% 20% 17% 15%
$56,000 $81,000 $95,000
$99,000 $82,000 $65,000
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Why Is Hotel Value Growth Slowing?
• Supply growth is accelerating
• Occupancy levels are reaching their cyclical peak
• Hotel values exceeding replacement cost
• Inevitable rise in mortgage interest rates
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- 4 - Source: STR and HVS
Mortgage REITS Overactive
Deregulation of Savings and Loans
Real Estate Financing Boom but Minimal
Construction Lending
Gradual Supply Acceleration
Supply Growth Is Accelerating But Not Excessively
HVS Forecasts Continue to Reflect
Slow Supply Growth
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Annual Feasibility Studies Are Gradually Recovering
0
50
100
150
200
250
2005 2006 2007 2008 2009 2010 2011 2012 2013
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Supply Growth Will Be Gradual
y = 4318x + 84.117 R² = 0.6771
0
50
100
150
200
250
0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00%
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Occupancy Levels Are Reaching Their Cyclical Peak
48.0%
50.0%
52.0%
54.0%
56.0%
58.0%
60.0%
62.0%
64.0%
66.0%
68.0%
1986 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015
Stabilized Occupancy
Occupancy
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Hotel Values vs. Hotel Costs: When to Build and Buy?
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
1987 1991 1995 1999 2003 2007 2011 2015 2018
Val
ue
pe
r R
oo
m
Value
Cost
Build
Buy
Build
Source: STR and HVS
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Impact on Value From Rising Interest Rates
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What Do These Hotel Value Trends Mean To Investors?
US hotel value growth is moderating, however
opportunities exist in individual markets
Good time to refinance or sell either this year or in 2015
Better to build than to buy
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Projected Change In Value Per Room: 2013 - 2017
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Top U.S. Cities - Value Per Room - 2013
Source: STR and HVS
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HVI.HVS.Com
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Major Hotel Sales Transactions (Assets $10M+)
Source: Real Capital Analytics (RCA) and HVS
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Calistoga Ranch, Napa Valley, CA
$1,100,000 per key
Prices Exceeding $1 Million Per Key
Park Lane Hotel, Manhattan, NY
$1,090,909 per key
Langham Place Fifth Avenue, Manhattan, NY
$1,070,093 per key
Source: HVS
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Derived Cap Rates Remain Unchanged
Source: Derived From Hotels Appraised by HVS at Time Of Sale
6.1
7.7
9.5
5.8
7.4
9.3
6.2
7.4
9.2
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Full Service SS & ES Ltd. Service
2013 2011 2012
Select Service & Extended Stay
Limited Service
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Buy
Miami
Tampa
Orlando
Atlanta
Sell
Cleveland
Detroit
Where To Buy, Sell And Build
Build
Anywhere you can get construction financing
Phoenix
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Summary of Findings - U.S. Hotel Industry
► Hotel values continue to grow but at a slowing rate
► The future of mortgage interest rates – the big unknown
► Don’t worry about future supply growth – the lack of
construction financing is likely to continue
► Ideal conditions for another strong transaction year –
activity is expected to equal or exceed that of 2013
► Availability of debt will continue, with lender competition
putting pressure on interest rates and loan-to-value ratios
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The Future Looks Good For
The U.S. Hotel Industry
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HVS Hotel Management Contract Survey USA | Europe | India | APAC
May 2014
HVS India
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14%
86%
India
11%
89%
APAC
Yes
No
61%
39%
USA
Provision for Owner’s Priority
49% 51%
Europe
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49% 51%
APAC
Yes
No 72%
28%
India
63%
37%
Europe
66%
34%
USA
Provision for Operator Performance Test
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25%
75%
Europe
27%
73%
India 6%
94%
APAC
Yes
No
44%
56%
USA
Operator Termination for Non-Performance and Upon Sale
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Thank You