By Jonathan B. Sebbane ~ Consulting and Valuation Analyst at HVS New York
Monday, 10th September 2007
Today in our industry, nothing is meant to last forever, and this is true of hotel ownership -
Industry trends in terms of corporate strategy, we clearly notice that most major hotel firms are gearing toward an asset-light approach to remain competitive.
From a global perspective, the hospitality industry has seen an exceptional level of transaction activity, changes in hotel ownership, and new management structures over the last five years. One of the main factors that stimulated these key trends is probably the split between hotel ownership and hotel operations. Indeed, publicly quoted hotel operating companies are selling owned properties and concentrating on core business as they continue to recover from real estate cycles. This strategy allows them to lighten their balance sheet, gather capital to finance international growth, and execute share buy-backs, thereby increasing their share price.
According to Steve Rushmore, President and Founder of HVS, 2006 was a "Good Time to Own Hotels in the United States" as hotel values continued their rapid growth and both occupancies and room rates escalated and capitalization rates declined. HVS research indicates that in 2006 there were 249 hotel transactions valued at more than $10 million, up from 237 in 2005, with the average price per room rising to $203,000 from $160,000. The HVS 2006 U.S. Major Hotel Transactions Survey also shows that in 2006, the ten largest sales by price per room reflected an average of $874,000. Moreover, of the sales tracked by HVS, 17 had a price per room greater than $450,000, with the largest portfolio sale being Host Hotels & Resort's acquisition of 33 hotels for $4.1 billion.
In 2006, public companies, including hotel operators, continued to be net sellers. Large hotel companies, such as Marriott International, InterContinental Hotels... [continues]
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