The Challenges and Opportunities of Foreign Investment in the U.S. Hospitality Market
By William A. Brewer III Managing Partner, Brewer, Attorneys & Counselors | December 25, 2016
Why Foreign Investors Like the U.S. Market
The U.S. hospitality market remains particularly attractive to foreign investors. The Boston Hospitality Review reports:
"In 2015, total U.S. hotel transactions soared above $43 billion, largely due to full-service hotel sales in key gateway markets such as New York and San Francisco. During the first three quarters of 2015, cross-border hotel investments in the U.S. amounted to $6.4 billion, representing more than 20% of total deal volume, a 165% increase in foreign investment over the prior year period."
Foreign buying in 2015 accounted for 16% of total investment in U.S. real estate, about double the 8% average in the ten years through 2012. Bloomberg reported in October 2016 that China accounted for the majority of a surge in Asian investment in international real estate.
There are numerous reasons why foreign investors find the U.S. market attractive. Asian institutions, specifically insurance companies, have relatively low allocations to real estate, which can offer higher yields than available on bonds at a time of low to negative interest rates.
It has been reported, international funds "invest abroad in order to diversify their portfolios and hedge currency, political, and regional risk. Real estate is an attractive form of investment for any investor given its tangible nature, inflation-hedging track record and easily-quantifiable valuation… Purchasing hotels in international markets allows investment firms to gain broader recognition, customer base, and market intelligence."