Key indicators of the U.S. hotel industry strength in Q2 2016 continue to suggest that the sector is stabilizing at normalized performance levels, according to a new outlook published by JLL.
National occupancy remains stable at an historic high, and ADR growth for the first half of the year amounted to a healthy 3.1%. U.S. hotel transaction volume in Q2 2016 remained steady compared to the level of deal activity recorded for the prior quarter.
While RevPAR growth and acquisitions activity have certainly softened relative to the extraordinary levels achieved in 2015, a more historical perspective shows that the current level of performance is hardly depressed. Given that key sources of liquidity remain active in the market and operating fundamentals continue to be strong, JLL maintains a positive outlook for the sector in 2016
Here are some key data points through the first half of 2016:
- Cap rates for hotel assets increased only marginally in the first half of 2016 averaging at 7.8%.
- Lodging investment sales year-to-date: US$11.1 billion (-57%)
- Average cap rate: 7.8% (20bp 12-month change)
- RevPAR growth for U.S. hotels improved to 3.1% for the first half of the year, marking a slight improvement from the first quarter’s growth rate of 2.7%.
- The number of hotel rooms under construction has steadily increased but remains consistent with national supply growth at or below the long-term average of 2% for the year ahead.
- Total sales volume for U.S. hotel transactions amounted to US$5.6 billion in Q2, compared to US$5.5 billion in Q1.
- Share prices for publically-traded lodging REITs have continued to recover. As of mid-July, the Dow Jones U.S. Hotel & Lodging REITs Index had risen 32% since January.