In 2009, hotel real estate values hit a low after the recession that began in 2008. Since then, though, the market has been improving for real estate companies, and real estate values have nearly doubled in the past three years. Starwood and Marriott are at their highest prices ever, and that healthy status has got share sales soaring.
According to Keith Gelb of Rockpoint, the sales have, in part, been initiated by the slowed growth.
“Fundamentals are still pretty strong but, in general, revpar is increasing at a declining rate,” he said. “The capital markets have been quite strong and we’ve executed our business plans sooner than anticipated.”
In other words, the share prices are still rising, but not as fast as they have been up until this point. “We still have two to three years of pretty good growth and below-average supply increases,” says Scott D. Smith of PKF Consulting USA LLC. “But if demand declines, then hoteliers will start to lose occupancy and discount their room rates, and obviously that will have a great impact on net operating income.”
That means that, for groups like Blackstone, which is the largest buyout firm, the time to sell is now. Blackstone, headed by CEO Stephen Schwarzman, is selling shares of Hilton and Extended Stay America, cashing in on the high share prices while they last.