Is now the right time for hotel owners to sell? Steve Kirby from hotel brokerage and advisory services firm The Mumford Company, argues it is, at least in the United States market.
After surviving a year like 2020, many hoteliers just won’t believe that 2021 is the time to sell but in many cases that assessment may be true. At this point last year, the only buyers were the bargain basement groups. However, a short 12 months later, lodging investors are plentiful and cash-strong.
Though many draw parallels between the financial crisis of 2008 and the past year, they are dissimilar in several key areas. During the previous crisis, several factors that caused distress throughout the economy are not applicable today. Those factors include overleverage on virtually all real estate asset classes with corresponding stress on banks and other institutional lenders, a loss of confidence in all financial establishments and a prolonged recovery period.
Reducing Risk
In second quarter 2020, lenders and buyers anticipated a flood of distressed properties, with accompanying discounts, having to be sold quickly. Many opportunists established funds earmarked to purchase these distressed assets. However, the flood of distressed properties did not materialize. Midyear 2021 brings a variety of vaccine options, an abatement of the virus impact and the reopening of most domestic schools and state economies. Leisure demand is tracking close to 2019 levels, and it seems likely that commercial travel won’t lag far behind. Smaller conferences are already happening, and future bookings look very promising. The trajectory of the economic recovery very much seems to be in the upswing of a “U”-shaped recovery.
Road to Recovery
At this point, the referenced accumulated monies need an investment vehicle or will need to be returned to investors.
This is an excerpt of an article published in our sister title Hotel Management. Read the full article here