Investors poured over $12.5 billion into hotel acquisitions in January-March, the highest first-quarter volume since 2016, according to CoStar. It said investor interest remained strong, continuing a trend from 2021, when the overall value of hotel deals climbed to $50 billion, the highest ever recorded.
Luxury hotel and resort assets maintained their strong appeal to investors in the first quarter and early April. Recent transactions in this category included the acquisition of the 284-key Sheraton La Caleta Resort & Spa in Tenerife, Spain by Banco Santander and Signal Capital Partners, Outrigger Hospitality's purchase of the 81-key Maafushivaru Resort in the Maldives or the acquisition of the 530-key Hyatt Regency Indian Wells Resort & Spa at Palm Springs in the US by Trinity Investments and Oaktree.
Extended-stay and select-service hotels also continued to attract significant investment in the first few months of 2022. Mission Hill Hospitality, a KSL Capital Partners firm focused on select-service and extended stay properties, purchased the 100-key Inn at Naples, Tapestry Collection by Hilton in Florida in March, while Sandpiper Lodging Trust acquired a 122-room WoodSpring Suites extended stay hotel in Tampa in February and two other WoodSpring Suites properties in Orlando a month later.
Investors also kept up their interest in co-living conversions going into 2022. In recent examples from Asia, PGIM Real Estate reportedly bought two Hong Kong hotels in January to turn them into co-living facilities, while Hong Kong-based Weave Living teamed up with developer SLB to buy the 88-key Hotel Clover in Singapore in March and rebrand it as Waive Suites from 2023. Weave Living also partnered in April with PGIM Real Estate to buy the 435-key Rosedale Hotel Kowloon in Hong Kong.
In terms of transaction value, the biggest deals completed in 2022 included the $6.25 billion sale of the 4,028-key The Venetian Resort in Las Vegas by Las Vegas Sands to Apollo Global Management and Vici Properties. Newly announced transactions included the $708 million purchase of the 631-key Hyatt on the Bund in Shanghai by Shimao Group to state-controlled Shanghai Land Group and the £420 million acquisition of a majority stake in Point A Hotels in the UK by Tristan Capital Partners.
Several risk factors impacted customer demand and investor sentiment in the hospitality sector in January-March, ranging from unfavorable economic developments, such as rising inflation or the unprecedented increase in energy prices, to the surge of new Covid-19 cases and the re-introduction of travel restrictions in some parts of Asia. In Europe, Russia's invasion of Ukraine and the subsequent sanctions by the EU created social and economic uncertainties, raising concerns among investors.
Yet, real estate and hospitality experts expect continued recovery in key hotel markets for the rest of the year. CBRE in March raised its forecasts for 2022 ADR, occupancy and RevPAR in the US, also saying that recovering hotel transaction volume indicated rising supply of assets for sale. The recent renewal of the EB-5 visa program, enabling foreigners investing in US businesses to obtain green cards, could also lead to increased interest for US hotel and hospitality assets from international investors.
In Europe, strong real estate investment in the first quarter and increased investor activity in the past 12 months point to solid prospects for the remainder of 2022, Savills said in March, adding that the direct impact of the Ukraine war may be limited, except in central and eastern Europe. Hotel market recovery in the Asia-Pacific region will be relatively modest, but hotel investment is expected to rise as the weight of capital chasing hotels is now at an all-time high, CBRE predicted at end-March.
Investors do appear to have enough gunpowder to support hotel investment and make new deals in 2022. Private real estate firms alone raised $3.35 billion in new funds exclusively dedicated to the hospitality sector in 2021, up from just $1.5 billion in 2021, according to data from PERE. Investment funds targeting hospitality among various other sectors reached their final close with a total amount of almost $5.5 billion in January-February, the latest data from the RealfinX Platform show.
In an indication of major investors potentially seeking to expand their hotel portfolio, US investment giant Blackstone - which had $881 billion of assets under management at the end of 2021 - recently suggested it might want to increase its exposure in the hotel market. "When we got into Covid, it was around 12%. Today, we wish our hotel portfolio was bigger," Blackstone senior managing director Tyler Henritze reportedly said at a hotel investment conference in Atlanta in late March.