Doron F. Eghbali Commercial Law Blog on Lawyers.com

Hotel Deals May Be Staging a Cautious Comeback

Tuesday, June 15, 2010 by Doron F. Eghbali

Data indicate hotel deals may be staging a comeback. Hotels are often the first casualties of real estate because they can, literally, empty out overnight. Let us analyze the data and the reasons for cautious optimism related to this comeback.

SOME BACKGROUND

For months sellers were unwilling to put their properties on the market since they were unwilling to sell at relatively low prices. On the other hand, lenders instead of dumping such loans tended to restructure them, further helping out distressed commercial property owners to weather the storm. However, a number of factors including rebound in travel, aggregation of all-cash buyers and relative reduction in hotel construction have further spurred a relative upturn in hotel deals.

1. BUSINESS TRAVEL& TOURISM

US occupancy is nearly up by two percentage points from last year, based on Travel Research, Inc. In fact, US hotels hit their lowest point in 2009 with revenue per available room declining by 18.3% and occupancy plunging by 8%, according to Smith Travel Research, Inc.

2. LENDERS & ALL CASH BUYERS

Some lenders are putting the commercial properties they seized from delinquent borrowers back on the market. However, given the relative scarcity of debt financing, sellers with cash have the upper hand. However, given the persistent problems with debt financing, it seems the whole commercial real estate market could be imperiled, if the economy takes another hit.

3. SUPPLY & DEMAND

In 2008 and 2009, a wave of hotel construction added to the already overfilled real estate market. This construction boom along with commercial real estate bust further placed downward pressures on hotel prices as supply far surpassed demand. However, this glut may be cautiously over now.

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DORON EGHBALI is a Partner at the Beverly Hills Offices of Law Advocate Group, LLP. He Primarily Practices Business, Real Estate and Enter tainment Law. Doron Can Be Reached at: 310-651-3065. For More Information, Please, Visit: HERE.

Posted at 10:26 AM

Topic: Commercial Law