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BWI Hotel Investment Activity Soars
Record-breaking Baltimore Washington Airport (BWI) passenger growth over the past three years along with strong airport hotel fundamentals is fueling investment in the market. Connect Media asked Berkadia’s Kyle Stevenson to share insights into the BWI market in our latest 3 CRE Q&A.
Q: What makes the BWI market so attractive?
A: The BWI lodging market is one of the most compelling airport hotel markets for investors because it’s a business district in and of itself. The BWI Business District corridor is characterized by heavy government contractor presence, stemming from Fort Meade’s ever-expanding cyber security unit, the NSA, and other government offices and installations. As a result, the airport related demand that a typical airport hotel relies upon becomes secondary to the region’s government/business related demand channel. This enables hotel operators throughout the BWI area to charge higher nightly rates for rooms which, when managed correctly, drives NOI and thus value.
Q: What is the outlook for the BWI hotel market? What is expected to drive investment activity in the market in 2018?
A: The last 12 months have seen a flurry of hotel transactions throughout BWI. There have been nearly a dozen transactions. This activity is a result of the market’s rising occupancy trend which increased nearly 5 points since 2016, currently around 77%. Moreover, as primary demand related businesses continue to grow in the market, like Fort Meade’s cyber security unit, topline lodging econometrics will do equally well. This is expected to keep investor sentiment positive for the near term.
Q: What are some examples of investments and what is behind those transactions?
A: Examples include:
The Holiday Inn, which was sold by an institutional investor/operator as it was nearing the end of the investment strategy’s timeline. The purchaser was a local owner/operator who was looking for a full-service compact hotel in the market.
The Westin, which was sold by a privately held investor/operator due to a shift in their overall investment strategy away from full-service hotels. The asset was purchased by a local owner who will bring in a third-party manager. The new owner sees an opportunity to make the hotel’s margins more efficient as it better positions itself within the broader lodging market as occupancy grows in the near term.
For comments, questions or concerns, please contact Dennis Kaiser
*Pictured recent sale: Sheraton Hotel Baltimore Washington Airport
- ◦Sale/Acquisition
