Why Q4 may not be a ‘blowout’ for M&A

Hise said that while Q4 could be stronger than Q3 transactions (especially for large trophy acquisitions or value-add properties) and surpass Q4 of last year, uncertainty in the market still looms.

“There has been lower topline revenue growth and increased expenses, which makes increased profitability difficult for hotels,” she said. “There still seems to be uncertainty on how quickly and how much rates will be cut. It is also unclear what the impact will be on inflation and the 10-year treasury yield.”

Chad Littell, CoStar’s national director of US Capital Markets Analytics, said that despite the Fed cutting rates, treasury yields have gone up since September, and fixed-rate borrowing costs for commercial real estate are higher than they were a few months ago.

Chad Littell

“Which is why I’m assuming deal volume will still make progress over Q3 but not be a blowout quarter like many expected this summer,” Littell said. “In October, inflation reaccelerated in the U.S., Canada and the Eurozone. I expect this trend to continue, and it should also hold treasury yields at similar levels to what we’re seeing now.”

Littell said the Fed Funds futures market is continuing to pull rate cut expectations out of its 2025 projections. “As of late November, the market is assuming we may get one more 25 basis point cut and that may be it for a while as it digests future inflation,” he said.

Top deals through Q3

TOP HOTEL DEALS THROUGH Q3 (by sales price)

Here’s the CoStar data of the top hotel deals through the third quarter of 2024 ranked by sales price. Six of the 10 deals happened in Q3 and the list leads off with the billion-plus-dollar sale of the Hyatt Regency Orlando.

1. Hyatt Regency Orlando (Orlando) — $1.07 billion, August 16, 1,641 rooms ($652,041 per key)
2. Arizona Biltmore, LXR Hotels & Resorts (Phoenix) — $705 million, May 8, 703 rooms ($1,002,845 per key)
3. The Ritz-Carlton O’ahu, Turtle Bay (Kahuku, Hawaii) — $680 million, August 2, 463 rooms ($1,468,683 per key)
4. The Ritz-Carlton Key Biscayne, Miami (Miami) — $400 million, January 12, 423 rooms ($1,432,767 per key) 
5. W South Beach (Miami) — $400 million, October 28. 346 rooms, ($1,156,069 per key)
6. Embassy Suites by Hilton Nashville Downtown (Nashville, Tennessee) — $347.2 million, August 15, 506 rooms ($686,122 per key) 
7. Eau Palm Beach Resort & Spa (Lantana, Florida) —$317.1 million, August 9, 309 rooms ($1,025,952 per key)
8. Thompson Central Park New York (New York City) — $308 million, September 16, 587 rooms ($524,702 per key)
9. 1 Hotel Central Park (New York City) —$265 million, July 12, 234 rooms ($1,132,479 per key)
10. Hyatt Regency San Antonio Riverwalk (San Antonio, Texas) — $230 million, April 23, 630 rooms ($365,079 per key)

TOP HOTEL DEALS THROUGH Q3 2024 (Price per key)

Here’s the CoStar data of the top hotel deals through the third quarter of 2024 ranked by price per key. Most deals happened in the year's first half, but the $680 million sale of The Ritz-Carlton O’ahu, Turtle Bay in Hawaii in Q3 leads the list.

1. The Ritz-Carlton O’ahu, Turtle Bay (Kahuku, Hawaii) — $680 million, August 2, 463 rooms ($1,468,683 per key)
2. The Ritz-Carlton Key Biscayne, Miami (Miami) — $400 million, January 12, 423 rooms ($1,432,767 per key) 
3. W South Beach (Miami) — $400 million, October 28. 346 rooms, ($1,156,069 per key)
4. 1 Hotel Central Park (New York City) —$265 million, July 12, 234 rooms ($1,132,479 per key)
5. Eau Palm Beach Resort & Spa (Lantana, Florida) —$317.1 million, August 9, 309 rooms ($1,025,952 per key)
6. Arizona Biltmore, LXR Hotels & Resorts (Phoenix) — $705 million, May 8, 703 rooms ($1,002,845 per key)
7. Baron’s Cove (Long Island, New York) — $66.5 million, June 28, 67 rooms ($992,537 per key)
8. The William Vale (Brooklyn, New York) — $176.44 million, June 18, 183 rooms, ($964,153 per key)
9. 1 Hotel Nashville (Nashville, Tennessee) — $182.8 million, April 15, 215 rooms ($850,336 per key) 
10. Sonder Flatiron (New York City) — $47.83 million, June 5, 62 rooms ($771,392 per key)