Throughout the remainder of 2006, The Plasencia Group, Inc., the leading hospitality transaction and consulting services firm representing owners of hotels, resorts and golf courses, advises hotel and resort owners to take advantage of the appetite for expanding lodging assets and suggests that those investing in the lodging industry take advantage of low interest rates, negligible supply increases and strong operating fundamentals.
The Plasencia Group, Inc. sees at least 18 to 24 more months of unfazed growth for the hotel sector, thanks mainly to sound industry operating fundamentals. In fact, they argue that some markets such as Seattle, Portland, Denver, San Francisco, Phoenix, Chicago, North Dallas, Atlanta and Charlotte are just beginning to experience the early stages of recovery.
There will also be a steady flow of transaction activity throughout the remainder of 2006 and possibly longer. This is due, in part, to a number of major property owners who will need to shed assets in the second half of 2006 and also due to the improved quality of hotels hitting the markets this year.
"As we near the peak of the current cycle, we are likely to see some very prominent hotels and resorts exchange hands," says Lou Plasencia, President and CEO of The Plasencia Group, Inc. (TPG). "Current owners of hotels will want to fully optimize their returns rather than getting stuck with them for another cycle. And there should be an improvement over the next six months in the quality of hotels hitting the market."
There have been fewer large portfolio transactions as of late resulting in a slight decline on the volume of sales, but price-per-room levels remain high while cap rates remain low.
Nevertheless, The Plasencia Group, Inc. expects to see three or four larger portfolio transactions completed by the end of 2006, in addition to two or three M&A transactions that have yet to be announced.
Plasencia urges those who are looking to invest in lodging assets to do so sooner, rather than later, as the value of these properties are now skyrocketing and may not return to these highs for a long time. Buyers are still pricing assets in a speculative fashion, based on forward projections. However, when the market begins to turn, owners will have missed the opportunity to sell at a very high price to buyers waiting for a future upswing. Plasencia counsels that owners should take advantage now of buyers' appetite. "It doesn't get much better than this, but it won't last forever," he says.
As to growing concern for the effect of gas prices on hoteliers, Lou Plasencia is not worried. Contrary to what economic pundits are suggesting, Plasencia believes that increasing gasoline prices may actually not harm the lodging industry as much as people may think.
While Americans may be angry with the price of filling up their cars, it will not stop them from traveling. "According to the Bureau of Economic Affairs, consumer spending on energy, as a fraction of total personal consumption, has actually declined since 1980," says Plasencia. "People will still travel."
About The Plasencia Group, Inc.
Founded in 1993, The Plasencia Group is the leading hospitality transaction and consulting services firm representing owners of hotels, resorts, and golf courses, with regional offices in Tampa, Hartford, Chicago, Dallas, Austin, Houston, Little Rock, San Francisco and San Diego. In conjunction with its affiliates, Regent Street for luxury properties and Sun Hospitality Advisors for limited service properties, The Plasencia Group has provided personalized, valued-added investment opportunities and services to clients such as Prudential (NYSE:PRU), Host Marriott Corporation (NYSE:HMT), MeriStar Hospitality Corporation (NYSE:MHX) and Metropolitan Life Insurance Company (NYSE:MET). The Plasencia Group offers a full range of value-added solutions, including transactions, property valuation analysis, financial and strategic planning, project management and disposition, and proprietary industry research.
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