HVS Hotel Transaction Activity: The Factors Influencing a Return to Normalcy in a Post-COVID-19 Time - By Drew Noecker

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The year-over-year individual property transaction volume in Q1 2020 was down 61.4% from the same period in 2019, as COVID-19 became a major concern in the second half of the quarter; thus, this portends a large drop in Q2 2020 with a full impact of COVID-19 disruption. With our industry’s already-realized transaction volume drop and the continuation of this trend, we wanted to look at a few conditions that we believe will need to be present for a return to a robust hotel transaction market. Selected Important Factors for a Consistent, Stable Market After COVID-19 Cases Wane

  • Availability of Traditional, Stabilized Financing
    There are multiple transitional, or bridge, lenders with which HVS is currently working. However, to return to a healthy market, the CMBS market, SBA lenders, and traditional balance-sheet lenders need to return to lending. 

  • Understanding of the Volatile Environment by the Lending Community
    HVS is working with many companies who have “paused” hotel lending until a clearer RevPAR trajectory emerges. When lenders feel comfortable with a specific uptrend, the traditional debt market will reopen.

  • Return of Broader Commercial Real Estate Investors to the Hotel Market
    One of the significant drivers of the growth in hotel transactions over the last 8+ years was the entry of traditional real estate private equity firms into the hotel ownership space. Those firms are currently concerned about the occupancy volatility of hotels during this health issue, but once the broader real estate private equity firms are again comfortable, the transaction market will improve.

  • Solidification of the Concessions Available from Franchisors 
    Major franchise companies such as Marriott, Hilton, Hyatt, Choice, and IHG have discussed possible concessions for their franchisees. Once these concessions regarding fees and renovations are understood, owners can safely bid on available assets and return the market to a healthier state.

April 14, 2020 – Updated Transaction Data

April 14, 2020 – Updated Transaction Data