Dive Brief:
- Both the median sale price and number of sales of large hotels fell in the first quarter of 2024, according to newly released indices from the Cornell Center for Hospitality Research.
- In Q1, hotels in top markets, or gateway cities, outperformed those in non-gateway cities, but hotel prices and transaction volume still fell for both large and small hotels in the two market categories.
- Looking ahead, researchers expect to see a rise in the price of large hotels and a decline in the price of small hotels in the second quarter of 2024.
Dive Insight:
In the first quarter of 2024, the median sale price and number of sales of large hotels (classified as those sold for $10 million or more) fell 24.6% and 33.9% respectively, quarter over quarter, and 22.2% and 14.3% year over year. While the prices of large hotels continued to soften, those of smaller hotels remained relatively stationary in comparison.
Only the Midwest (5.6%), Mid-Atlantic (4.4%) and West South-Central (3.1%) regions experienced year-over-year hotel-price gains in the first quarter of 2024. The remaining regions all posted year-over-year price declines. Similarly, quarter over quarter, only the Midwest (3.2%), South Atlantic (3.8%) and West South-Central (1.6%) regions posted moderate single-digit gains.
Reversing a prior trend, hotels in gateway cities outperformed non-gateway cities, increasing 5.4% in price compared to a decline of 1% for non-gateway cities on a quarter-over-quarter basis. Year over year, hotel prices in both gateway and non-gateway cities declined approximately 2%.
Transaction volume fell year over year and quarter over quarter for both large and small hotels in gateway and non-gateway cities. The study defines gateway cities as Boston, Chicago, Honolulu, Los Angeles, Miami, New York, San Francisco and Washington, D.C.
This decline in transactions can be attributed in part to the cost of borrowing exceeding the return for hotels — which means the economic profit for hotels is negative. But Cornell found that the cost of financing for hotels should become less expensive relative to other major property types in the short run.
Cornell researchers also expect to see a rise in the price of large hotels and a decline in prices for small hotels in the second quarter of 2024.
Earlier this year, JLL predicted that urban markets would drive global hotel investment in 2024.
Global investment firm Certares made one such investment earlier this month with its $171 million acquisition of Hilton Boston Back Bay.
