US transaction volume down 23% in 1Q24

The LW Hospitality Advisors (LWHA) Q1 2024 Major U.S. Hotel Sales Survey includes 66 single asset sale transactions over $10 million, which totaled nearly $2.5 billion and included approximately 10,700 hotel rooms with an average sale price per room of $230,000. View a list of the deals here.

In comparison, the LWHA Q4 2023 survey included 86 sales that totaled just over $3 billion and included approximately 13,900 hotel rooms with an average sale price per room of $219,000.

Comparing Q1 2024 with Q4 2023, the number of trades decreased approximately 23% while total dollar volume decreased roughly 18% and sale price per room increased 5%. By further comparison, the LWHA Q1 2023 survey included 83 single asset sale transactions over $10 million, which totaled $3.5 billion and included approximately 12,500 hotel rooms with an average sale price per room of $279,000. Comparing Q1 2024 with Q1 2023, the number of trades decreased approximately 20% while total dollar volume decreased 30% and sale price per room decreased by roughly 18%.

Continued relatively high cost of debt has thus far not eased widened bid/ask spreads and continues to damper U.S. hotel sale investment volume, said LWHA Co-Founder, President and CEO Daniel Lesser.

Lesser said assets with deferred brand mandated property improvement plans (PIPs) are under pressure to complete them in a costly environment. Combined with $195 billion in hotel loans maturing during the next three years, and/or rising technical defaults resulting from failing to meet debt service coverage ratios, property owners will be compelled to inject fresh capital, which may require deal restructuring or an outright asset sale.

Lesser added that during the latter half of this year, price discovery and value clarity will gain traction, transaction activity will increase, and hotels will remain a darling asset class, particularly during a sticky inflation environment.

1Q24 deal notes

Additional noteworthy Q1 2024 observations include eight trades or roughly 12% of the national quarter total occurred in the State of Florida, followed by seven sales or 11% in New York. Six trades or roughly 9% of the national quarter total occurred in California and five sales or 8% in Arizona.

Five major hotel sale transactions in Arizona represented $768 million or 31% of Q1 2024 investment activity. Three major transactions in Massachusetts represented $309 million or 13% of Q1 2024 investment activity. Seven major transactions in New York represented $204 million or 8% of investment activity. Six major transactions in California represented $165 million or 7% of activity. Finally, eight major transactions in Florida represented $160 million or 7% of deals in Q1 2024.

Among the big deals, Blackstone sold the 705-room Arizona Biltmore, A Waldorf Astoria Resort, in Phoenix for $705 million, or $1 million per key to U.K.-based PE firm Henderson Park. The deal occurred nearly six years after Blackstone acquired the asset for roughly $400 million from Singaporean sovereign wealth fund GIC, and subsequently renovated the property for more than $150 million.

A joint venture between Certares and Belcourt Capital Partners acquired the 390-room Hilton Boston Back Bay in Boston for $171 million, or $438,000 per key from Ashford Hospitality Trust. Also in Boston, RLJ Lodging Trust purchased the 304-room Wyndham Boston Beacon Hill for $125 million, or $411,000 per key, from Charles River Plaza Co. RLJ acquired the leased fee position which was previously subject to a ground lease set to expire in 2028.