Investor interest in US resorts increased significantly in 2013 following several years of limited transaction volume as the sector was slower to recover than other areas of the US lodging market.
JLL's Hotels & Hospitality Group conducted an assessment of the resort sector, which included evaluating the current competitive landscape as well as the underlying fundamentals impacting the operating performance of resorts. This report also outlines trends and implications for investors.
Resort transactions reboundingTransaction volume is growing steadily and the average price per room of resort transactions is rising. From 2009 to 2013 the average price per key of resorts grew at a compound annual rate of nearly 40 percent.
Furthermore, 2013 was the most active year for resort transactions since the economic downturn, with $6.1 billion in transaction volume and an average price per key of $295,000.
The 2013 transaction figures were bolstered by an off-shore buyer's acquisition of three Waldorf Astoria properties for approximately $1.3 billion, taking a strong position in the U.S. resort sector.
Investor interest in the sector continued through the first half of 2014, with nearly $3 billion in transaction volume. Given the strong first half, JLL projects resort transaction volume to reach $6 billion in 2014.
To further quantify the scale of the resort investment landscape, JLL analyzed resort transactions as a proportion of all U.S. hotel transaction volume. In 2013, resort transactions comprised 28 percent of all U.S. hotel transaction volume.
This is the highest proportion on record, and above the previous high seen in 2006 when resort trades accounted for 21 percent of U.S. hotel transaction volume, evidencing interest in the sector.
Resort transaction values still below previous peakJLL also indexed the 12-month moving average price per key of assets that have transacted to the previous peak values seen in 2007. While the average price per key of hotels transacting on a national basis has surpassed 2007 values, pricing among resorts has been slower to recover.
As of June 2014, based on assets that have traded, the average price per key of resort sales was 93 percent of the prior peak seen in May 2007. On the other hand, the market as a whole has seen transaction values rebound to 103 percent of the previous peak.
The implication is that resorts offer more runway for growth from a value appreciation standpoint.
Full report