This recent compilation from different hotel capital advisors suggests that getting a small hotel deal done is extremely difficult as proven by the lack of those transactions to date. In fact, anything under $20,000,000 is considered dead from the get go. Not exactly encouraging news if you are trying to sell or buy a smaller hotel. Here are some excerpts: – “Lee Hunter, chief operating officer for Hunter Realty Associates, said the hotel industry has always been a street-corner business and some hotel owners don’t take into account individual markets when they set expectations for a selling price. The bid-ask spread (is a common problem),” Hunter said. “What is the value?” – “Michael Sonnabend, managing partner with PMZ Hotel Finance Group, said because there are more deals seeking capital than there is capital seeking deals, issues with PIPs or soon-to-expire ground leases often are placed at the bottom of the pile—and in some cases are thrown out entirely.” Read more on what these and other hotel capital advisors said. Typically, smaller hotels are less than 200 rooms and under $100,000 per key. In many parts of the USA outside the urban, high demand, high density environments like New York, San Francisco and Washington, DC, those valuations per room are below $80,000 per room. Bottom line – it is just too small a transaction for folks if you are a hotel advisory department in the private equity finance and institutional lending side to make money. If you a financier in this area, what are your hotel & leisure advisors recommending? Or, are you currently trying to buy or sell a hotel that is on the market for under $20MM? What are you encountering with the hotel capital advisors involved in the transaction? Please share your commentary here.
Perry Group
Hotel & Restaurant Experts For The Hospitality Industry
