Buy a Hotel in this Economy?

Obviously Warren Buffet’s Blackstone Group and others think now is the time to buy a hotel in the USA. Although there is still a lot of distress talk amongst hotel owners and operators alike, there are also various signs pointing at the recovery, albeit a slow one, is starting to muster some momentum. Here are summaries of recent stories that reflect this sentiment: – According to an excerpt from “It’s not time to build hotels says… For owners with cash, now is the time to act. Lodging Econometrics reports hotel prices have rebounded during the past six quarters, and buyers, especially those in top markets, are paying premium prices. These primary locations are quickly becoming seller’s markets, with better deals to be found in secondary and tertiary areas. While some deals have approached 2007 levels, most properties are still available for less than peak pricing.” – As to the hotel demand and rates, STR reports this week that “Overall, the industry’s occupancy rose 6% to 60.3%, its average daily rate increased 4.8% to US$101.73, and its revenue per available room finished the week up 11.1% to US$61.31.” If you are looking to buy a hotel now, this good news is followed by the PKF report on income that “After two years of declining profits, the average U.S. hotel enjoyed a 9.8% bottom line increase in 2010, according to a recently released report, Trends in the Hotel Industry, issued by PKF Hospitality Research. The gain, however, does not make up for the 37.9% cumulative loss experienced by U.S. hotels during 2008 and 2009.” – Lastly, if you are involved in hotel asset management or a hotel real estate advisor, read the Wall Street Journal story. It talks “about Blackstone buying 45 hotel mortgages at 80 cents on the dollar from the FDIC” and considered a high price for distressed property, which we see as a further signal they see the rebound taking shape as well. Does your acquisition plan include a timeline to buy a hotel? If so, when do you see the best time to acquire lodging real estate given the above factors and state of the economic rebound?