-
The Clancy Hotel in San Francisco recently sold for $115 Million – Image Credit Marriott International
Visit
The U.S. hotel market is experiencing a slowdown in sales due to a significant gap between seller expectations and buyer willingness, according to industry experts at the Lodging Conference in Phoenix. Executives emphasized the need for sellers to adjust their pricing strategies to stimulate transactions, as the market faces pressure from stagnant deals and a lack of major buyers.
The U.S. hotel industry is currently facing a slump in sales, primarily due to a disconnect between the prices sellers are hoping to achieve and the offers buyers are willing to make. This issue was a focal point at the recent Lodging Conference in Phoenix, where industry leaders discussed the challenges and potential solutions for revitalizing the market. Stephen Zsigray, President and CEO of Ashford Hospitality Trust, highlighted that buyers are cautious about where they invest their capital, while sellers remain attached to pre-pandemic valuations.
Pressure to Adjust Pricing
Industry experts agree that sellers may need to lower their price expectations to facilitate deals. Michael Bernath, Senior Vice President of Acquisitions and Dispositions for Peachtree Group, noted that deals priced around $40 million or less are more likely to attract buyers. However, transactions for higher-priced properties are stalling, leading to increased pressure on sellers. Kate Henriksen, Co-Chief Investment Officer of RLJ Lodging Trust, pointed out that the longer properties remain unsold, the more pressure builds to close deals, especially as other factors like refinancing and capital investment come into play.
Buyer Dynamics
The current market lacks a dominant group of buyers, with foreign capital, REITs, and major private equity firms largely absent from the scene. Justin Leonard, President of DiamondRock Hospitality Company, explained that these entities are seeking better opportunities in other real estate sectors. This has resulted in a fragmented market where hotel sales occur sporadically, often as smaller, individual transactions rather than large portfolio sales. Dan Lesser, President and CEO of LW Hospitality Advisors, emphasized the need for sellers to become more realistic in their pricing to encourage more acquisitions.
Potential Opportunity Markets
Despite the challenges, certain markets are seen as having growth potential. Kate Henriksen expressed optimism about San Francisco’s recovery, citing upcoming events like the Super Bowl and FIFA World Cup 2026 as catalysts for increased activity. Other cities such as Washington, D.C., and Austin, Texas, were also identified as attractive markets. Stephen Zsigray noted that current pricing levels in D.C. are appealing, while Austin presents opportunities due to an ongoing convention center renovation.
Conclusion
The U.S. hotel market is at a crossroads, with sellers needing to reassess their pricing strategies to align with current buyer expectations. While the market faces challenges from a lack of major buyers and stagnant deals, there are opportunities for growth in select cities. As the industry navigates these complexities, the focus remains on bridging the bid-ask gap to reignite transactions and stimulate market activity.
Discover more at CoStar.
