It’s a byproduct of post-recession lessening demand from leisure travelers in the United States for extra amenities and luxurious services, resulting in a 55 percent increase in select-service hotel accommodations, according to MMGY Global’s 2013 Portrait of American Travelers. Jones Lang LaSalle’s Hotel & Hospitality experts point to five key highlights affecting the market:
- Select service hotel trades spiked 145 percent in the first eight months of 2013.
- The segment reached $4.62 billion compared with a mere $1.89 billion in 2012.
- The bulk of the select service trades transacted, a whopping 63 percent, were portfolio acquisitions.
- Hotel occupancy in upscale chains exceeded the 2006 pre-recession peak.
- Boston, Chicago, Denver, Houston and Los Angeles ranked as the top markets for select service hotel trades.
According to Jones Lang LaSalle’s research, this year private equity funds have tripled their investment into select service hotels as they pursued mixed-bag portfolios that offered value-add opportunities. Additionally, REITs doubled their investment dollars into the sector and chased after premium-branded assets in densely populated markets.
“There is an art to knowing when to buy, and when to sell. If investors time it right, they’ll be able to maximize the cycle and their proceeds,” said Mark Fair, Managing Director of Jones Lang LaSalle’s Hotels & Hospitality Group. "The first eight months of 2013 were robust with select service trades, but during the back half of the year the market will take a deep breath. It’s likely a tremendous amount of select service product will hit the market in early 2014, as interest rates are expected to remain stable through the remainder of 2013, with increasing RevPAR rates, competition and yields.”
Select service hotel rooms make up more than half of all U.S. hotel rooms, with more than 2.8 million in operation. Although the segment is seeing nominal supply growth of two percent, with approximately 57,000 rooms in the pipeline, the demand continues to amplify with rising popularity among U.S. travelers.
Jones Lang LaSalle’s Hotels & Hospitality Group serves as the hospitality industry’s global leader in real estate services for luxury, upscale, select-service and budget hotels; timeshare and fractional ownership properties; convention centers; mixed-use developments and other hospitality properties. The firm’s more than 265 dedicated hospitality experts partner with investors and owner/operators around the globe to support and shape investment strategies that deliver maximum value throughout the entire lifecycle of an asset. In the last five years, the team completed more transactions than any other hospitality real estate advisor in the world totaling nearly $25 billion, while also completing approximately 4,000 advisory and valuation assignments. The group’s hotels and hospitality specialists provide independent and expert advice to clients, backed by industry-leading research.
About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 2.6 billion square feet and completed $63 billion in sales, acquisitions and finance transactions in 2012. Its investment management business, LaSalle Investment Management, has $46.3 billion of real estate assets under management. For further information, visit www.jll.com.
Logos, product and company names mentioned are the property of their respective owners.