The hotel market is one that remains in a state of flux.
Over the last several years there has been a significant lack of new construction of hotel properties, primarily due to the financing markets, as well as a decline in tourism nationwide. As our economy begins to recover there will a need for additional hotel capacity. At the same time, while the European economy suffers, this may result in a reduced demand for US hotel rooms from European tourists who will be traveling less frequently, creating a forecast for a relatively shaky market. The best opportunities appear to be in larger central business districts of major cities where occupancies are at or exceed 75%.
New York is a unique market, given that the cost of hotel rooms has risen to be generally unaffordable, except at the very top of the market. Therefore, the opportunity in a city such as New York is to convert non-hotel properties that lie outside of the central business areas but are connected by transportation hubs, so that tourists can find affordable hotel rooms close to but not in Manhattan. A current example of this is Brooklyn, a good bet for new or converted hotel rooms, especially with the construction of The Barclay’s Center. In other markets, one might wish to consider a prime location with an older property that has fallen into disrepair or lack or high vacancy. Buying those hotels both on “the cheap” and repositioning them, or renovating them and “putting a flag on them” (i.e. Marriott, Wyndham, etc.) could be an opportunity as well.