While some industries are feeling the weight of the economy’s downturn, the hotel and lodging industry has sustained its momentum in a post-pandemic boom. Air traffic has snapped back while the average cost of an Airbnb rental this summer is higher than it was in 2019. The ongoing boom is undoubtedly attracting attention from investors. The industry has seen a string of mega-deals in just the past few months.
This month, hospitality investment company HHM announced it would boost its hotel property portfolio by 30 percent by acquiring family-run Urgo Hotels & Resorts. Similarly, Choice Hotels International announced its acquisition of Radisson Hotel Group Americas for $675 million.
The Radisson acquisition enhances “Choice’s position in the core upper-midscale hospitality segments while extending its reach into the upper-upscale and upscale full-service travel segments, particularly in the Midwest and West Coast of the United States,” said a Choice representative.
In May, Brookfield Asset Management announced an all-cash deal for Watermark Lodging Trust’s 25-hotel portfolio. The $3.8 billion deal is a clear outlier in an economic environment where liquidity seems to have completely evaporated. It could highlight the fact that investors see hospitality and lodging as one of the few remaining growth opportunities in 2022.
Additionally, regulators in Australia recently approved Blackstone’s acquisition of Crown Resorts for $6.3 billion. It’s the investment giant’s largest deal in the Asia Pacific region.
“…[T]he microeconomy of hospitality is decoupled from the macroeconomy because we still have so much recovery left,” said Jay Shah, CEO of Hersha Hospitality Trust, at the NYU International Hospitality Industry Investment Conference this month.
This recovery in the lodgings and hospitality sector could continue despite rising interest rates. Hotel properties were arguably undervalued as investors shunned the sector throughout the pandemic. Meanwhile, some operators have business models that are more resilient and put them in a better position to make long-term bets during downturns. “Choice Hotels is generally not as impacted by increases in interest rates, given a meaningful portion of our unit growth comes from conversions as well as new construction,” the company said.
-Vishesh Raisinghani
