June 29, 2021 11:24 am
The effects of Covid-19 are widely known by all of us in hospitality, especially those of us who are in the hotel business. Many of our clients suffered from revenue reductions of nearly 75%, while others much less. On the rare occasion, we also had owners where the revenue during the last 15 months was stable or actually increased.
Overall, the lack of travel caused such uncertainty and panic that the deal activity suffered correspondingly. During the initial phase of the pandemic, buyers were terminating deals. Lenders were doing the same, and also shutting down the access to capital for hotel loans. During that phase, we talked to dozens of lenders, and 98% of them were temporarily out of the hotel lending business……who could blame them. However, during that same time period, we had sellers & buyers who still wished to transact, and extended their purchase agreements, to see what would happen. We had a number of instances where the wait paid off, and deals were closed in the 3rd and 4th quarters. For the most part, buyers of those assets are now extremely pleased with their acquisitions.
Our activity throughout the pandemic (inquiries) remained higher than we ever expected it would, especially for owner-operated assets. However, the mid-market limited and select service activity did slow quite a bit. Like previous downturns, investors in mid-market assets expected discounts, but most sellers were not willing to grant them. Now 12 months later, we are experiencing a resurgence of activity, not only in the owner-operator arena, but also in the mid-market segment. It should not surprise anyone that the revenue recovery and the decreasing perceived risk of covid has brought more investors back into the investment arena. Many of the national SBA lenders are now actively marketing for hospitality loans.
The effects of Covid 19 on hospitality real estate caused wounds that were deep and disconcerting. But it appears that we are heading to a more rapid recovery than was predicted or that which was experienced in 2008. The market did not experience the avalanche of foreclosures and bankruptcies that were predicted in mid-2020. Therefore, there is not a huge wave of foreclosed property that will need to be “washed out” of the system, like in 2009 – 2012. Perhaps the distressed “mentally” that comes with every downturn will quickly fade.
At least, that is the way we see it. Over the last 90 days, we have closed 8 deals, with several more in the pipeline. Our level of inquiry (by buyers) remains very active, but we are now limited in what we have to offer, so it might make sense for you to consider a sale if timing is right for you. We understand that there can be a wide variety of motivating factors, whenever an owner contemplates the sale a hotel. Our staff of experienced brokers can help you determine if the time is right for you to consider a sale. If you are interested in investigating our services, email or call any of our brokers, or please fill out our quick no-cost evaluation form, and we’ll be in touch!
We have sold most of our listing inventory which is now at an all-time low. It might make sense to consider that exit strategy you have been thinking about. Feel free to give any of our experienced brokers a call, an email, or complete the form and submit it.