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The U.S. Hotel performance had a relatively weak start to the quarter of Q1 2024 compared to the last few weeks of Q4 2023 on account of the calendar shift post the holiday season. However, this was quickly offset in late January and throughout the remaining quarter because of various trade shows, business events, and sports events like the AHR expo, Super Bowl final, WM Open, SHOT Show, and World of Concrete across major U.S. hotel markets like Chicago, Las Vegas, Phoenix among others.

Occupancy was reported at 46.80% at the start of Q1 2024, which increased to 62.30% at the end of Q1 2024. ADR was $152.17 at the start of Q1 2024, which increased slightly to $157.14 at the end of Q1 2024. RevPAR was $71.28 at the start of Q1 2024, which increased to $97.83 at the end of Q1 2024. (Source: STR)

Analytical Summary

Major Q1 2024 transactions (By Sale Price)

1.      Hotel Name: The Ritz-Carlton Key Biscayne, Miami Location: Key Biscayne, FL No. of rooms: 279 Sale Price: $400,000,000 Price per unit: $1,433,692 per unit Seller: Brookfield Hotel Properties Buyer: Gencom
2.      Hotel Name: Wyndham Boston Beacon Hill Location: Boston, MA No. of rooms: 304 Sale Price: $125,000,000 Price per unit: $411,184 per unit Seller: New Boston Fund, Inc. Buyer: RLJ Lodging Trust
3.      Hotel Name: AC Hotel Washington DC Convention Center Location: Washington, DC No. of rooms: 234 Sale Price: $116,800,000 Price per unit: $499,145 per unit Seller: Douglas Development Co Buyer: Apple Hospitality REIT, Inc

Source: CoStar

Q1 2024 Cap Rates

Average cap rates for U.S. hotels increased by 21 basis points in Q1 2024 compared to Q4 2023. The following table illustrates minimum, maximum, and average cap rates for U.S. hotels in Q1 2024 & Q4 2023.

Source: RealtyRates.com

Outlook

The transaction outlook for the rest of 2024 is constructive, with investors eager to get on a commercial real estate sector poised for more growth. As higher interest rates make deal underwriting difficult, the bid-ask spread continues to be elevated. Owners with strong operating histories encountered buyers looking for distress, and neither side was willing to give in during 2023. Industry participants expect that deal flow will increase again in the second half of 2024 as investors who stayed on the sidelines will be compelled to act, no matter how the Fed acts.