STR Analytics/HotelNewsNow.com survey results reveal strong optimism among investors

Eighty-one percent of investors surveyed actively are pursuing acquisitions, even though 28 percent currently hold delinquent assets, according to the Hotel Investors’ Gauge, a survey from STR Analytics and HotelNewsNow.com.

“It appears clear that investors see the light at the end of the tunnel,” said Stephen Hennis, director of STR Analytics. “The survey results indicate that most investors are predicting a quick recovery for the industry, which is one of the factors driving the increased transaction activity in recent months. Moreover, despite the reported dearth of available debt for commercial real estate, roughly two-thirds of the lenders surveyed are willing to finance lodging acquisitions, albeit at more stringent terms than what was offered just a few years ago.”

Other key findings from the Hotel Investors’ Gauge include:

• Lenders are at the table for certain deals. Sixty-two percent of lenders surveyed are willing to fund new acquisitions, despite the fact that 62 percent have worked out delinquent loans, 38 percent have foreclosed upon properties, and 60 percent currently control assets that have been foreclosed upon.
• Generally, investors appear bullish on the hotel industry. More than half believe average daily rate will return to the levels achieved during the prior peak by 2013, and occupancy by 2012.
• The average cap rate on trailing cash flow is 8.6 percent.
• More than 40 percent of investors are willing to acquire assets in all-cash transactions.
• Loan-to-value ratios are more conservative, averaging 58.1 percent among lenders surveyed.
• Most loan terms are at a floating rate, with the spread averaging 470 basis points above LIBOR.

“It’s encouraging for the hotel industry to see some positive attitudes in the lending community given the rough going during the past two years,” said Jeff Higley, VP of digital media and communications at Hotelnewsnow.com/STR. “This investment survey will provide insight to the psyche of the investment community, and going forward we believe that’s going to be a valuable tool for everyone involved in the hotel industry.”

The Hotel Investors’ Gauge included a broad spectrum of hotel investors and lenders. The survey will be distributed on a quarterly basis by HotelNewsNow.com and STR Analytics. Further survey analysis will be highlighted in the first issue of the Hotel Real Estate Barometer, which will be available mid-November.