U.S. To Top Rest Of World In 2001 Hotel Transactions

<B>U.S. To Top Rest Of World In 2001 Hotel Transactions</B>

By Bruce Serlen

The U.S. hotel market will be the world's most active region in 2001, with owners here expressing a higher intent to sell than those from elsewhere, according to an international poll of hotel investors released last month.

"The Americas is expected to be the most active market in the short term," said Arthur Adler, managing director of the Americas for Jones Lang LaSalle, the New York-based investment banking services group that conducted the poll. "Almost half of the 800 international hotel investors we surveyed said they have a propensity to buy here. More specifically, investors said they prefer properties in New York, Boston, Los Angeles, San Francisco and Washington, D.C., which have high barriers to entry."

For U.S. travel buyers, a strong investment market for hotels, particularly in major cities, is cause for concern because strong investor interest translates into steep transaction prices. In turn, high sale prices create pressure on new owners to achieve a healthy return on investment. This would make them less likely to negotiate significant room rate discounts, assuming the robust national economy continues through 2001 and demand for rooms remains strong.

Adler said investors overwhelmingly favor investment in gateway markets over secondary cities. He also said investors in the Americas anticipate the highest initial return on investment. More than 75 percent of the 800 investors cited by Jones Lang LaSalle said they were seeking first class hotels, 44.6 percent said they were in the market for deluxe properties and 30.8 percent said they were seeking small resorts described as "deluxe/boutique."

"New York, Boston, Los Angeles, San Francisco and Washington, D.C., also have strong occupancy and average daily rate performance expectations in the short and medium term," said Arthur Buser, executive vice president of Jones Lang LaSalle and head of the firm's West Coast office. "These cities have demonstrated above-average yield growth and are in an upturn position on the market cycle."

The tremendous strength of the New York hotel market, for example, was underscored last week by Sean Hennessey, director of hospitality and leisure consulting for PricewaterhouseCoopers. "While national hotel occupancy rates for 2000 are estimated to be 63.9 percent, New York City is projected to have a citywide occupancy for the year of 85.3 percent," he said. "Similarly, the national room rate average for the year is estimated to be $85.06, while the rate in New York is estimated to be $213."

New York also may have set a monthly record when citywide occupancy rates were more than 90 percent for 18 days in October, Hennessey said.

According to Jones Lang LaSalle, Honolulu and Los Angeles have the most optimistic buy sentiment among investors. The sentiment to sell, meanwhile, is strongest in Dallas, Miami, Orlando and Phoenix.

The investors polled by Jones Lang LaSalle said they were keenly interested in expanding their portfolio of hotel and resort assets, showing a strong 46.7 percent intention to buy.