2020 Hotel Transactions and RevPAR
— 10 experts shared their view
Based on survey results, the panel is bullish (median 67.5%) on the prospect of the 2020 transaction market beating 2019's tally of $62 billion. Interestingly, nearly 1/3 of the panel is 100% confident of this! On the other hand, the panel's outlook on U.S. RevPar for 2020 (median at 50%) is gloomier with nearly 2/3 of the panel believing it less than 50% likely to exceed STR's forecast of 0.5% growth.
Questions to panel experts: Why are you so bullish on hotel transactions but more conservative on RevPAR? If hotel operating performance stagnates, why will there be such continued interest in acquiring hotel properties? Should growth in hotel performance (i.e., RevPAR) not be a significant force driving hotel transactions and values? For the naysayers on transaction growth, why is this the case?
Director – Investments at Archer Hotel Capital
I am a bit surprised to read this. From memory I was not quite so positive in my response. Although it has to be said that my expertise lies predominantly in Europe. I would have expected there to be a strong correlation between RevPAR trends and investment trends. The premise is that as RevPAR reaches new peaks so do capital values. And when capital values are at or near peak the bid/ask gap tends to be lower. In a perfect world this should lead to more transactions.
Practically speaking we are at peak RevPAR (across Europe) with limited growth on the horizon. Hence, there should be some willing sellers out there which should make for a reasonable amount of transactions. Although there are some markets which have already turned slightly which immediately increases the bid/ask gap. Hence, I'd argue - notwithstanding some big portfolio deals which can always change the year-on-year results - that significantly increased transaction volumes in absence of RevPAR growth is not very likely.