Cleveland Research has just recently released the results of overall hotel transactions throughout 2014.
The graph below shows that hotel cap rates started at over 8.0% in 2014 and has been inconsistently declining throughout the year, ending at 7.7%. Since the transaction volume in the hotel sector represents only 10% of all commercial real estate transactions, the data in this sector are subjective due to fewer transactions.
Below is the graph for US hotel cap rates and spread, showing that cap rates remained close to 500-550 bps. This is above the 10yr benchmark throughout 2014.
Cleveland Research also compared the activities of CBD hotel properties and suburban hotels. Throughout 2014, CBD Hotel properties had -35 cap rates while suburban hotel cap rates are flat. This could be the effect of more activities in the full-service segment from private equity and REIT buyers. The Economy, on the other hand, hit 9.6%, confirming the expected results for 2014.
US hotel cap rates by city shows that NYC metro has the lowest at 6.3% and Houston has the highest at 8.8%.
Deal volume continues to show improvements. The total in 2014 ($460B) is 20% ($85B) greater than in 2013.
Although the Hotel sector represents only 10% of all the commercial real estate transactions, it is one of the fastest-growing sectors in 2014 (both in dollars and percentage terms) having increased by 46% by the end of the year.
US hotel deal volume by type shows that full service properties are at 66%, lower than the percentage in 2013 (71%). However, it still represents the majority of deal value in 2014.
Compared to 2013, the hotel deal volume growth of full service properties has grown slower (it is up to 35% in 2014 compared to the 43% growth in 2013). The growth of limited service is notably high, compared to the $2B in 2013. It ended 2014 with $6B growth.
New York City Metro still dominates the hotel real estate deal volume, accumulating a total of $7.2B. NYC is followed by Hawaii, San Francisco, South Florida and Los Angeles, all four hitting between $2B and $3B. The total of these 5 markets represents almost half the total transaction in 2014.
Below are the top 20 largest buyers and sellers that represent the half of the total transaction volume in 2014.