[Video Transcription]
You know what you have never seen in a recession: RevPAR growth.
But that is exactly what STR and [Tourism Economics] are forecasting for 2023. In one word: Unprecedented.
[Tourism Economics] is projecting that there will be a slowdown in GDP growth in 2023. The slowdown will be mild, only a 0.5% GDP contraction, and therefore the recession will be mild as well.
And because of that ADR and RevPAR growth are still actually positive in 2023. The growth rates were cut, but still, 3% expansion on record high rates is not nothing and RevPAR continues to grow as well.
In one word: “Unprecedented.”
Hello, my name is Jan Freitag with CoStar, and here is what’s on our radar this month:
The forecast, of course, we’ll talk about the October data, I met with some meeting planners and have some takeaways, a lot of deals happened. And I want to name-check Bill Gates. Let’s get started.
October room demand did not top October 2019 results but the difference was only 3%, let’s call that flat. Year-over-year change from 2021 stood at 7.8%. RevPAR was up 23% from last year and the Year-to-date change is now up 33%. So, at this point we are seeing continued leisure, corporate transient and group demand and even a recession will likely not derail that, but it may slow it.
The number of group rooms sold was 8.9 million for luxury and Upper Upscale class hotels—and that’s also basically back to the October 2019 number. The difference equates to just around 3% as well. It will be very interesting to see what impact, if any, a mild recession will have on this chart.
A few days ago, I was able to meet with some meeting planners and they were pretty frustrated when they asked for a proposal and hoteliers were basically telling them, “Hey, I don’t want to replace my high-rated leisure demand with lower-rated corporate group demand.” And so, it’s my public service announcement here just to say this is a cyclical industry and in 2024 or 2025 we need those Monday, Tuesday, Wednesday groups rooms back, association demand back so remember to build a long-term relationship with those meeting planners that gets us through the next couple of years.
It was a very busy week on the deal front. On the investment side, we have all been wondering about the Strategic Hotel Portfolio / ANbang / Daija portfolio and now we have some new owners to announce.
The Montage Laguna was sold to the owner of the Golden Nugget Casino Tilman Fertitta for a reported $650 million, or $2.5 million per key. I talked about this deal last month and now it came to fruition. But I like talking about it since it gives me one more opportunity to showcase the beautiful drone footage that Darren Asay from our office shot of this unique property.
Two Four Seasons hotels were bought by Public REITS. Braemer Hotels & Resorts bought True North Hotel for $267 or $1.3 million per key. They had also bought the Ritz Carlton Reserve in 2021 for a $1.7 million price per key.
Host Hotels & Resorts bought the 125-room Jackson Hole Four Seasons for $2.5m per key which is a total purchase price of $315 million. Recall that Host had gotten out of the Sheraton New York, a downtown urban property they sold at a steep discount. They bought another resort, the Four Seasons Resort Orlando at Walt Disney World® Resort for $610 million in May.
One other deal caught my eye because it’s right downtown in our fair city Nashville, TN. The Mexican Billionaire, Villarreal, made a deal in mid-2020 to purchase the Four Seasons hotel from the developer Congress Group for $165 million. The new owner was able to get a loan for over 100% of the purchase price. How? Well, at time of closing this month the hotel was appraised for $285 Million. So, between agreeing to pay for the construction cost and getting the hotel appraised the value increased by $120 million dollars. Nashville is hot.
And to finish, let’s talk about Bill Gates.
Two years ago, he went on TV and said post-COVID business travel would be down by 50%. Well, I think by now we can all agree that that is wrong. But what is right? Well, we also don’t know that yet.
So, corporate demand is back mostly, and Microsoft Teams meetings, as efficient as they are, cannot substitute for one-on-one, one-on-many getting together.
Until next time. I wish you well, I wish you health.