US hotel revenues fully recover in 2022; Brookfield to sell Fla. hotel for $835M

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The U.S. hotel sector has largely recovered from the pandemic's fallout, as revenues, profits and labor costs hit record highs in 2022, according to STR's P&L data for the year.

Total estimated revenue and gross operating profit in 2022 were $239.7 billion and $101.3 billion, respectively. The metrics, both all-time highs, indicate the sector has fully recovered when compared to 2019 levels. The outperformance was attributed to strong demand and pricing power influenced by inflation, among other things.

On a per-available-room basis, gross operating profit was down 5.5% from 2019 to $73.70 and total revenue was 4.3% lower at $202.23.

Among the top 25 markets included in the report, seven fully surpassed 2019 total revenue per available room and gross operating profit per available room levels. These markets are Tampa, Miami and Orlando in Florida; San Diego and Orange County in California; Nashville, Tenn.; and Phoenix.

CBRE's November 2022 Hotel Horizons report predicts RevPAR will grow 5.8% in 2023 despite persistent inflation and a possible moderate recession. CBRE earlier forecast RevPAR growth of 5.6% for the year.

Supply growth over the next five years is expected to be 40% lower than historical trends due to the high cost of construction materials, a tight labor market and high interest rates. This could result in near-term cash flows being dedicated to debt reductions and renovations, according to CBRE.

Hotels across all service levels are predicted to surpass 2019 RevPAR levels by the close of 2023.

CHART OF THE WEEK: LaSalle cuts REIT holdings in Q4'22

⮞ LaSalle Investment Management Securities LLC reduced its stake in 18 U.S. real estate investment trusts, including Healthpeak Properties Inc. and OUTFRONT Media Inc., in the fourth quarter of 2022.

⮞ During the period, the investment manager more than tripled its position in Ventas Inc.

⮞ Prologis Inc. became LaSalle's top holding after it topped up its share count in the industrial REIT by 61.2%. The stake has a market value of $183.3 million.

Hotel transactions

* Trinity Investments and Credit Suisse Asset Management LLC agreed to acquire the Diplomat Beach Resort in Hollywood, Fla., from Brookfield Asset Management Ltd. for $835 million, The Wall Street Journal reported. The oceanfront hotel comprises 1,000 rooms and about 200,000 square feet of meeting space.

* Deka Immobilien GmbH sold the shuttered New York Marriott East Side hotel in Manhattan, N.Y., for $153.4 million. Hawkins Way Capital LLC and Värde Partners Europe Ltd. bought the 655-room property, which sits at 525 Lexington Ave.

* Hilton Grand Vacations Inc. bought The Central at 5th timeshare hotel in Manhattan from 54 Madison Partners LLC for $136 million, Commercial Observer reported, citing public records. 54 Madison took over the 161-room hotel via foreclosure in 2020 after its developer Hidrock Realty defaulted on its loan.

M&A

* Public Storage offered to buy fellow self-storage REIT Life Storage Inc. in an all-stock deal. Under the terms of the proposal, Life Storage shareholders would receive 0.4192 Public Storage share per Life Storage share they own.

* Summit Industrial Income REIT said it expects the company's pending sale to a joint venture between GIC Real Estate Pte Ltd. and Dream Industrial REIT to close on or about Feb. 17. Under the terms of the deal, the joint venture will pay C$23.50 per Summit Industrial unit in cash.

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