Where is the hotel market currently heading? What does it tell to investors?
 The U.S. hotel industry is one, if not the most affected investment space amid the outbreak — border closures and travel restrictions have put the demand for hotel investment on a lull. However, while the past year has been the worst year on record for U.S. hotels, recent months have started to show green shoots.

Recent figures from the Transportation Security Administration have shown[ that travel has started to recover, with over one million airport screenings daily](https://www.tsa.gov/coronavirus/passenger-throughput). While these numbers are still below the levels seen pre-COVID-19, they indicate the looming resurgence of travel, especially as the development and the rollout of the vaccine continue across the country.

With the expected recovery in travel demand, the next few months will certainly be a challenging period for hotel lenders and servicers, especially with the predicted uptick from hotel owners and investors. Artificial intelligence will be a huge driver that would help the hotel investment space thrive in the post-pandemic world. Should this be a sign for existing investors to step on the gas and for potential ones to take the plunge?

# Where is the hotel market heading?

The U.S. Construction Pipeline Trend Report by Lodging Econometrics (LE) showed that during the fourth quarter of 2020, there were 5,216 projects hotel projects with 650,222 rooms. This included ongoing constructions and those that are expected to commence in the next 12 months. While these numbers are down on a yearly basis, they remain stable considering the impacts of the COVID-19.

New York City was able to regain its position as the busiest market for hotel construction. During the last quarter of 2020, the city had 150 projects/25,640 rooms under construction.

Los Angeles followed with 148 projects/24,808. Dallas came in third with 147 projects/17,756 rooms. Atlanta reported the highest number of rooms with 19,863 for 140 projects. Completing the top five was Orlando, which hit a new record with 112 rooms and 19,764 rooms.

During the quarter, some markets announced more than 10 new construction projects, with Orlando and Miami each unveiling 18 projects with respective rooms of 4,806 and 2,756. New York also announced 17 projects with 2,700 rooms.

Overall, the top 50 markets opened the doors for 399 hotels with 52,581 rooms last year. Based on LE’s forecasts, another 509 projects with 66,475 rooms are expected to open this year, and 575 projects with 71,025 rooms in 2022.

The investment landscape of the global hotel industry over the past year was quite muted. Deals that were able to push through were all already underway prior to the shutdowns due to the pandemic.

Lenders were able to extend a helping hand to hotel owners by granting forbearance agreements. This flexibility has prevented many hotel owners from putting their properties up for sale.

What drove transactions over the past year were private equity groups and institutional investors. They accounted for 54% of the total transactions globally. During the year, the strategies of these investors shifted to acquiring assets in less dense markets and resorts. In fact, 21% of investment activity was located in resort markets. This was twice the share recorded in 2018.

Still, there are signs pointing to the gradual recovery of hotel investment given the improving prospects for travel and border reopening.

Recent projections from JLL point to a 35% increase in global hotel investment this year, underpinned by the robust economic outlook, ongoing vaccine rollout, and improving consumer intentions for travelling. However, the hotel investment space is only expected to realize a full recovery by 2024.
[{"id": "gzomdi3", "text": "Hotel always has been the riskiest of all real estate operations, thus the reason returns are also the highest when everything is normal. I have seen some hotels being renovated into residential units and once everything returns to normality I can bet there will be plenty of business travelers and tourism worldwide.", "replies": [], "depth": 1}, {"id": "gzosna1", "text": "I'm do hotel appraisals, feasibility studies, etc. for a living. Performance still varies widely by market and property type, but I can say that generally speaking people are a lot more bullish than they were a few months ago. Anecdotally, I've done appraisals for four hotels that were under contract in the last month versus four total in March - December last year. Special servicers are still our biggest clients and will be for sometime. Perhaps the biggest risk to recovery is staffing. Multiple GMs have told me they've had to close off reservations during peak weekends because they simply don't have the staff to clean the rooms. Every hotel is understaffed.", "replies": [{"id": "hzmc5nw", "text": "9 mths later....are hotels near airports making a comeback as far as new development and real estate sales goes? Im in the seattle airport area and pre covid a large hotel was starting to be under construction in front of the airport. But as of today its been on hold and is still just an empty site.", "replies": [{"id": "i9aqf8u", "text": "Near the dallas airport a group of hotels are doing 4m + 90-120 units. Do you think it's worth to build currently?", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gzotplf", "text": "When you say demand will get back to normal by 2024 is that prediction implying that the demand/supply equilibrium point in 2024 will be around what it was pre-Covid? As someone that never participated in hospitality/hotels I\u2019m curious if demand could end up outstripping supply in 2024... The numbers you quoted about new construction, how do those numbers compare with pre-Covid construction?", "replies": [], "depth": 1}, {"id": "gzoynd0", "text": "Hawaii Broker here, but not a hotel expert. That said, the flights and visitors to the island have come back big time. Here on Maui hotel numbers are up, but not nearly so much UP as other kinds of short term accommodations - be they legal or illegal. UP even more than tourism and hotel occupancy is the huge increase in the sale of fee simple expensive residential properties, think single family homes over $10M.\n\nWhat is also up, way UP is the local backlash. There's a broad swath of resident sentiment favoring hitting the pause button on building new vacation units be they hotel, time share, short term vacation rentals or any of the above. And also a school of thought favoring raising the property taxes in vacation and 2nd home designations substantially. (Hawaii has one of the lowest residential property tax rates in the nation)\n\nThe backlash is also palpable against the influx of travelers, mostly from the US Mainland, who seem to represent the worst of all possible worlds: at the high end -- too much money and no manners. In the cheap seats we are deluged with a spectrum that runs from the merely rude and disagreeable to the vagrants, addicts, mentally ill, homeless and indigent transported from many major US metro areas to our shores.\n\nOn the hotel labor front there is significant hesitancy from workers about returning to properties where the health status of the guests and the host property is uncertain.\n\nYou can project any numbers you want but IRL this thing is not over and it's too early to tell what the final outcome will be for existing hotels and proposed projects.\n\nIf you have big bucks to invest in Hawaii wait a little longer, the real pain hasn't started yet and there will be bargains. Look for distressed existing properties over anything proposed, even projects that claim to have all the necessary entitlements. Even in your best case scenario attitudes have changed and it's a tough sell.", "replies": [], "depth": 1}, {"id": "gzpbup0", "text": "https://podcasts.apple.com/us/podcast/the-fort-with-chris-powers/id1410549811?i=1000516735488\n\nThis is a good listen if you\u2019re interested.", "replies": [], "depth": 1}, {"id": "gzpkvi6", "text": "What is BOOMING right now are motels ranging from 50-100 rooms in areas that have homeless issues. Properties selling in socal for $160K per door!! Selling for more than flags such as Holiday Inn Express and Motel 6", "replies": [{"id": "gzpnizu", "text": "Why is that?", "replies": [{"id": "gzpo7bq", "text": "City of Austin is buying these types of properties to house homeless. They\u2019ve bought 3, I believe.", "replies": [], "depth": 3}, {"id": "gzpyvtu", "text": "city, county and state money....buying these properties and working with developers to  repurpose them into either low income housing or housing for the homeless.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}]