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Private Equity Drives Increased Hotel Investments So Far in 2018
Hotel acquisitions posted strong numbers and private equity has accounted for the lion’s share this year, according to research by JLL Hotels & Hospitality. So far in 2018, hotel transaction volume in the United States reached $29.7 billion, more than a 25% year-over-year increase, with private equity groups representing 37% of hotel acquisitions in the United States, or $11 billion. This compares to 30% ($7.1 billion) for all of 2017.
JLL reports private equity groups have more pockets of capital than they’ve had in the past, allowing them to pursue a wider variety of investment strategies related to hospitality, ranging from core plus to opportunistic plays. Additionally, private equity hotel buyers are focusing on acquiring complex full service hotels and portfolios.
While private equity may currently be the most dominant buyer, there are several other groups who are also demonstrating a strong appetite for hospitality product, notes JLL. Development companies have become more active in 2018, accounting for 13% ($4 billion) of YTD 2018 hotel acquisitions, compared to 10% for all of 2017. Additionally, offshore activity has observed a slight increase in 2018 to $4 billion of U.S. hotel acquisitions, compared to $3.6 billion over the same period in 2017.
Among the factors JLL says is contributing to the uptick in investment activity include:
- A strong economy, including the lowest unemployment rate in half a century and Q3 annualized real GDP growth clocking in at 3.5%.
- Continued leisure and corporate travel demand, with transient room night demand recording growth of nearly four percent as of August 2018,and group demand growing at 1.2% on a 12-month moving average basis.
- The hotel industry attracting more nontraditional and general real estate investors, in addition to traditional hotel investors.
* Pictured The Plaza New York
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