2024 was an eventful year around the world with elections held in more than 60 countries, representing nearly 50 percent of the world’s population. One of the most consequential results was Donald J. Trump winning the U.S. presidential election, who along with the Republican Party also won majorities in both houses of Congress. In addition to representing the third straight U.S. Presidential election during which the incumbent party lost, the year was notable for many additional incumbent losses around the world.
The U.S. economy continues to grow, albeit at a slower pace compared to the rapid rebound following the pandemic. Economic conditions are benefiting from strong consumer spending and a resilient job market with low unemployment. GDP growth is more moderate than in previous years, with 2025 projections indicating a 50-basis point decline in the rate of growth. While higher earners are enjoying a so-called wealth effect from gains in housing prices and the stock market, many lower-income consumers are relying on credit cards and other loans to support their spending, with signs of financial strain evidenced by rising delinquency rates. Numerous Americans have mostly exhausted their pandemic era savings and have generally been putting aside a smaller share of their annual incomes. While the U.S. economy remains on a solid growth trajectory, the outlook is clouded by navigating a complex environment marked by uncertainty surrounding lingering inflationary pressures. Furthermore, proposed regulatory, immigration, trade and tax policy heighten the potential for volatility.
Many perceive the incoming Trump administration and a unified government pointing to the U.S. entering a transformative period of growth-oriented policies and a strong pro-business environment. The proposed Department of Government Efficiency (DOGE) presidential advisory commission’s goal of restructuring the federal government and removing regulations to reduce expenditures and increase government efficiency, is anticipated to streamline operations and lowers taxes which should serve as a tailwind for the economy. Nevertheless, implementation of tariffs, risks of reaccelerating inflation, rising labor costs and a ballooning national deficit can limit growth and cause interest rates to rise. Several forces may fuel volatility during 2025 including elevated levels of inflation and interest rates, a wall of debt maturities, and geopolitical risks including the potential of physical conflict(s).
Despite positive economic growth, U.S. hotel operating fundamentals languished during this past year. Compared to 2023, both demand and supply for lodging slightly increased resulting in, for all intents and purposes, a flat national occupancy rate. Average daily rate (ADR), revenue per available room (RevPAR), and total hotel revenues marginally rose while expense growth generally increased at a greater rate placing negative pressure on profit margins. During the near term, positive economic drivers and growth in inbound foreign visitation are anticipated to increase travel activity. During 2025, the U.S. lodging sector is anticipated to experience slight growth, driven by modest increases in ADR’s, demand, and supply with a resultant increase in RevPAR. Operationally, the hotel industry continues to be challenged with the labor strikes and the availability and cost of labor and workers compensation insurance. Rising utility costs, property taxes and the availability of and/or property insurance costs are also placing negative pressure on lodging profitability.
The LW Hospitality Advisors (LWHA) Q4 2024 Major U.S. Hotel Sales Survey included 103 sales that totaled over $3.4 billion and included approximately 17,200 hotel rooms with an average deal size of $33.4 million and an average sale price per room of just under $200,000. In comparison, the LW Hospitality Advisors (LWHA) Q4 2023 Major U.S. Hotel Sales Survey included 86 sales that totaled just over $3.0 billion and included approximately 13,900 hotel rooms with an average deal size of $35.4 million and an average sale price per room of $219,000. Comparing Q4 2024 with Q4 2023, the number of trades increased approximately 20 percent while total dollar volume grew roughly 13 percent, average deal size dropped 6 percent and sale price per room diminished by roughly 9 percent.
For the year 2024, the LWHA Major U.S. Hotel Sales Survey includes 356 single transactions over $10 million. These transactions totaled just over $14.3 billion and included approximately 58,900 hotel rooms with an average deal size of $40.2 million, and an average sale price per room of $243,000. In comparison, for the year 2023, the LWHA Major U.S. Hotel Sales Survey includes 341 sale transactions over $10 million. These transactions totaled just over $12.8 billion and included approximately 52,500 hotel rooms with an average deal size of $37.7 million, and an average sale price per room of $244,000. Comparing 2024 with 2023, the number of trades increased over 4 percent while total dollar volume grew roughly 12 percent, average deal size rose close to 7 percent and sale price per room remained flat.
Newsworthy Q4 2024 observations include:
- Thirty trades, or roughly 29 percent of the national Q4 2024 total, occurred in California and Florida. These transactions total over $1.3 billion of investment activity, or 39 percent of the national Q4 aggregate.
- Eighteen major hotel sale transactions in the State of California represented $677 million of investment activity or 20 percent of the national Q4 aggregate.
- Twelve major hotel sale transactions in the State of Florida represented a total of $663 million of investment activity or 19 percent of the national Q4 aggregate.
- In a deal reportedly valued at $425 million, or over $1.2 million per key, Reuben Brothers acquired the 348-unit W South Beach in Miami from a joint venture between TriCap and RFR Realty. Note that the property includes 175 hotel rooms and 173 condo-hotel units.
- Dynamic City Capital acquired from T2 Hospitality, the 294-unit Residence Inn at Anaheim Resort/Convention Center & the 174-unit SpringHill Suites at Anaheim Resort/Convention Center in California for $303 million or $647,000 per unit for the combined 468 units.
- Ashford Hospitality Trust, Inc. (NYSE: AHT) sold the 315-room Courtyard Boston Downtown for $123.0 million or $390,500 per key.
- Highline Hospitality Partners acquired the 304-unit Hyatt Place & Hyatt House Charleston/Historic District in Charleston, SC for $113.1 million or $372,000 per unit.
- Ohana Real Estate Investors acquired from SECO Development, Inc. the 347 room Hyatt Regency Lake Washington at Seattle’s Southport in Renton, WA for approximately $103 million or $297,000 per key.
- The 17-unit Della Terra Mountain Chateau wedding venue in Estes Park, CO sold for $14 million or roughly $824,000 per key.
- Celebrity criminal defense lawyer Mark Geragos is reportedly part of an investment group that acquired the combined 19-unit Seahorse Resort and Villa Del Mar Inn located in San Clemente, CA for $15.5 million or roughly $815,000 per key.
Institutional investment platforms, several of whom are lodging centric, were active in the Q4 2024 hotel transaction arena.
- Examples of buyers include AWH Partners, Brookfield Properties, DiamondRock Hospitality Company, Dynamic City Capital, Elliott Investment Management, Highline Hospitality Partners, MCR, Noble Investment Group, Ohana Real Estate Investors, and Prospect Ridge.
- Examples of sellers include Ashford Hospitality Trust, Inc., Atrium Holding Company, Blackstone Real Estate Income Trust (BREIT), Brookfield Property Partners, Chartwell Hospitality, Chatham Lodging Trust, Fortress Investment Group, Gaw Capital Partners, Hyatt Hotels Corporation, KHP Capital Partners, Magna Hospitality Group, MCR, McSam Hotel Group, Park Hotels & Resorts Inc., Peachtree Hotel Group, Rockpoint Group, Summit Hotel Properties Inc., and Three Wall Capital.
An abundant amount of debt has been available for the sector as evidenced by numerous recently announced acquisition financings and property refinancings, including:
- Fontainebleau Development obtained two loans for a combined $1.7550 Billion to refinance the 1,594-unit Fontainebleau Miami Beach, FL and the 685 key JW Marriott Miami Turnberry Resort & Spa in Aventura, FL.
- In connection with 9 of its properties, Strategic Hotels & Resorts obtained a $1.58 billion securitized loan refinancing from Bank of America and German American Capital.
- A joint venture between Elliott Investment Management and Trinity Investments secured an $800 million loan in connection with the 409-acre Grande Lakes Orlando Resort Orlando, FL, which includes the 1,010-room JW Marriott Orlando, Grande Lakes and 582-room Ritz-Carlton Orlando, Grande Lakes.
- Clarion Partners, LLC secured a $677-million mortgage to refinance the CBM Two Hotels LP Portfolio consisting of 52 Courtyard by Marriott hotels.
- MCR secured a $300 million refinancing for a 22-hotel portfolio across 14 states and with a total of 2,855 guestrooms.
- Access Point Financial closed on a $133.1-million investment in Goldman Sachs ‘recent $985-million hotel portfolio refinance a 24-property hotel portfolio controlled by Atrium Holdings.
- Soros Fund Management provided a $130 million to refinance the 713 room YOTEL New York Times Square in NYC.
- Ashford Hospitality Trust, Inc. (NYSE: AHT) obtained a $121.5 million loan to refinance the 703-room Marriott Crystal Gateway Hotel located in Arlington, Virginia.
- Barings provided a $115 million loan to refinance the Renaissance Boston Seaport Hotel in Boston, MA.
- Oaktree Capital Management LP originated a $99 million loan secured by the 254-key Viewline Resort and 158-key Wildwood Hotel located in Snowmass, CO.
- Wave Crest Hotels and Resorts obtained a $92.5 million loan through MetLife Investment Management in connection with Cape Rey Carlsbad Beach, a Hilton Resort & Spa and Hilton Garden Inn Carlsbad Beach, both located in Carlsbad, CA.
- Creative Media & Community Trust Corporation secured a $92.2 million loan to refinance the 505 room Sheraton Grand Sacramento Hotel and parking garage in downtown Sacramento, CA.
- Beach Point Capital Management provided a $88.5 million loan to refinance the dual branded 288 key Courtyard & Residence Inn Marina Del Rey, CA.
- Chetrit Group obtained $88 million from Kawa Capital to refinance the under construction 280-unit Collins Park Hotel in Miami Beach, FL.
- Deutsche Bank provided $83 million for Elliott Management’s acquisition of the 230 room Gates Hotel South Beach in Miami Beach, FL.
- Metropolitan Commercial Bank provided BD Hotels, a $75 million construction loan to develop the 201-room Nora Hotel in West Palm Beach, FL.
- Deutsche Bank provided McSam Hotel Group a $65 million loan for the 270-unit SpringHill Suites New York Queens in Long Island City, NY.
- Driftwood Capital has secured $62.5 million in total refinancing for the 111 key Wylie Hotel Atlanta, GA and the 399-unit Sheraton Pittsburgh Hotel at Station Square in Pittsburgh, PA.
- Fortress Investment Group provided a $28.5 million loan for the Wylie Hotel Atlanta and Starwood Mortgage Capital and Greystone Commercial Mortgage Capital have provided a $34.0 million CMBS loan for the Sheraton Pittsburgh Hotel at Station Square.
- Southern Realty Trust Inc. originated a senior $57 million loan to refinance the 108 room Loren at Lady Bird Lake in Austin, TX.
- West77 Partners secured a $50 million loan through a national life insurance company for the 254-key Hilton Garden Inn Seattle Bellevue Downtown in Bellevue, WA.
- Mesa West Capital provided a joint venture led by Regent Partners and Mariner Group with $50 million in short-term first mortgage debt to refinance 193 key Thompson Savannah in Savannah, GA.
- A joint venture between Concord Hospitality and Panorama Holdings obtained a $49.5 million loan from New York Life to refinance the 192 room Courtyard by Marriott New York World Trade Center Area in NYC.
- Arch & Devonshire LLC obtained a $45 million bridge loan from Seven Hills Realty Trust in connection with its acquisition of the 178 room Club Quarters Hotel, Boston, Faneuil Hall in Boston, MA.
- HALL Structured Finance provided $44 million under a first lien bridge loan for the 303 room Hyatt Regency Hotel in Frisco, Texas.
- Icon Realty Management refinanced the 81-unit Moore Hotel in NYC with a $29.3 million loan from Starwood Property Trust.
- Peachtree Group provided a $26.5 million loan to refinance the 75-room Hotel Saint Vincent in New Orleans, LA.
- X-Caliber Holdings originated a $26.3 million debt package for Rev Development to develop Silverthorne Holiday Inn Express in Silverthorn, CO.
- Finvarb Group obtained a $24 million loan from Barings to refinance the Residence Inn Tempe Downtown/University by Marriott in Tempe, AZ.
- Arriba Capital closed a $17.9-million senior refinance for 111-unit voco The Darwin Hotel in Atlanta, GA.
- Hillcrest Finance provided $16.68 million in acquisition financing for the 120 key Residence Inn Santa Fe, NM.
A significant volume of hotel debt originated during the past decade is slated to mature during the near term. While no major bank failures occurred during the last year, many believe the extend and pretend strategy relative to distressed capital structures can no longer endure as several lenders, particularly regional banks, have already incurred losses writing down defaulted debt on their books. The good news is that CMBS, private debt funds, and balance sheet lenders are bullish on the sector and looking to deploy capital. Lodging facilities are performing well relative to other asset classes and offer a yield premium which has attracted capital to the sector. The Federal Reserve reduced its benchmark interest rate during its last three meetings, although it appears that fewer cuts are in store for 2025. After a relative lull, reduced interest rates have resulted in increasing hotel transaction activity which many perceive is poised to continue to rise. Many anticipate discretionary sellers to be motivated by strong market conditions and attempt to take advantage of opportunities to capitalize on value, while numerous non-discretionary sellers will be compelled to restructure or exit an investment out of necessity due to refinancing hurdles and/or the need for capital to execute deferred product improvement programs (PIP) that can no longer be delayed. Bid – ask spreads are narrowing between existing sponsors and new investors as an active transaction market provides market derived price discovery. Domestic and international hotel investors are generally optimistic as U.S. hotel values during the near term are anticipated to rise. Furthermore, many major urban markets such as NYC continue to benefit from post pandemic rebound of demand for lodging from corporate, group, and leisure travelers.
Daniel Lesser
+1 212 300 6684
LW Hospitality Advisors LLC (LWHA)
