Transaction traffic is heavy and the activity does not look like it will calm down anytime soon. In fact, Lodging Econometrics (LE) just released their Q4 2010 US Transaction Trends Report. The latest LE findings suggest that hotel transaction volume will continue to climb in the foreseeable future – at least up to the end of 2014. Obviously given NYC's position as a global center and tourist favorite, no slowdown is expected either at that point.
New York City Hotel Transactions
Despite the country being in an economic recovery, even 2010 was a remarkable year for NYC hotel transactions. At least 1,298 hotels were sold or transferred in the past year. That figure represents two and a half times the 513 transactions completed in 2009. Individual and Portfolio Transactions rose 19% year-over-year (YOY) going from 513 to 608 hotels.
More Hotels to Be build
If these figures are not impressive enough on their own, consider that 690 additional hotels were transferred in separate mergers. Between 2011 and 2014, transactions are expected to increase for two significant reasons. Wall Street banking activity will drive hotel transaction activity. As well, a considerable number of existing real estate loans will come due within the next three years.
Luxury Properties at Lower Prices
These assets will include distressed properties that will present affordable opportunities for prepared investors. Of course, the luxury market will also account for a flurry of activity between now and 2014. In many instances, lucky investors will be able to pick up luxury properties for lower prices. Regardless, investors are willing to pay the price for ownership of luxury real estate in New York City.
Every Hotel Category in Manhattan
The reality is that there will be a broad variety of hotel types in the future NYC hotel market. All categories can experience success because New York City sees visitors with different budgets and varying needs. When choosing a hotel, corporate travelers might prefer a specific type while leisure travelers prefer another brand. The NYC market can accommodate every category of hotel. Of course, certain hotel brands will do better during specific periods but the city's hotels are overall star performers.
In 2010, the Average Selling Price Per Room (ASPR) for transactions with a reported selling price increased an outstanding 86% YOY – just down 9% down from the 2007 recorded high. Within the reporting 477 hotels, ASPR increased to $108,199/room compared to $58,301 in 2009. At its 2007 peak period, ASPR was $119,420/room.
Selling prices will continue to rise in the coming years. Maybe the increase will be a more modest rate with rising interest rates and added brands on the market. Yet NYC hotels are definitely on an upward trend.