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June 9, 2016
Did you miss the NYU 2016 Hospitality Conference?
Don't worry. Just read hotelAVE's
Key Conference Takeaways
The Dashboard is a one page, one-stop shop for timely, detailed hospitality industry trends that will keep you in the know and ahead of the game.
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Overall Conference Sentiment -
The key message was we are not in a recession, but a slowdown and will continue to see modest and stable growth. Demand exceeded supply through April (most current available). Rate is under pressure from new supply, Airbnb-type supply, the travel restrictions of many large corporations, the cancel/rebook phenomena, and the strength of the US Dollar effecting international travel. Despite that, national outlook remains positive (see our attached Dashboard), albeit reduced from the 3x from the initial 2016 forecast from November.
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Debt -
Although improved from 1Q16, debt markets are not as robust. Lenders have tightened up on proceeds and underwriting thresholds. Debt yields and spreads are going up, proceeds are going down opening up opportunities for mezzanine debt and preferred equity to close the gap. Our dashboard shows movement of 100 to 200 basis points higher for debt yields, coupon rates up 50 to 100 basis points, and loan value thresholds down 5 to 10 percentage points.
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Valuation -
HVS anticipates flat YoY valuation in 2016 and 2017, a slight decline in 2018, and an approximately +8% rebound in 2019 when the new supply is absorbed. Average cap rates have increased from a year ago at an average of 50 basis points, though a bid ask spread has emerged for many willing sellers indicating that recent cap rates indices may not reflect the forward pricing trend (see our attached dashboard).
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Transactions -
New listings announced at the conference were concentrated in smaller select service assets and secondary markets. There are not a lot of large, top ten market deals on the broker dockets. Word is transactions under $50 million are still getting done at a "normal pace". With REITs on the sidelines and many real estate funds sitting tight, foreign buyers, family offices, and high net worth buyers may be able to transact at favorable pricing with more limited competition.
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Miami and New York -
Both markets are anticipated to absorb their above average supply by 2018, with a rebound from absorbed supply expected in 2019.
Managing to forward trends is one way we maximize hotel profitability. To learn more about hotelAVE and our exceptional asset management and consulting services, please contact us or visit our website at www.hotelAVE.com.
Best Regards,
Michelle Russo
Michelle Russo | Founder & CEO, CHAM, MAI, CHA
hotelAVE
| Providence - New York - Los Angeles
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