Branded Economy Hotel Sales Dominated by Motel 6 and Red Roof Inn Dispositions in 2019
By Rod Clough, MAI President - Americas , HVS | March 08, 2020
Sales of economy hotels in 2019 registered a healthy level, despite a decline in the number of limited-service hotels that sold during the year. Approximately 10% fewer hotels sold in 2019 than the number that traded hands in 2018, according to Real Capital Analytics (RCA). This decline was attributed entirely to a dearth of major portfolio transactions, while individual property transactions increased slightly for the year.
The U.S. economy continues to hold strong, showing great resiliency. The overall strength in consumer spending and confidence has benefited the U.S. hotel industry, driving this healthy transactions market as hotel demand remained at heightened levels, and most economy hotels have profited accordingly. By year-end 2019, gains in hotel demand had almost kept pace with new supply that opened in 2019, allowing economy hotels to retain strong occupancy levels overall.
From our database of limited-service hotel sales for 2019, which comprises data from RCA, buyers, sellers, and brokers, we further analyzed those properties that were affiliated with a national economy chain at the time of their sale. Transactions that fell into this category numbered 263 at the time this writing, encompassing a total of 26,413 rooms; these sales totaled $1.25 billion in transaction value, or just over $47,000 per room. It important to note that more 2019 sales will be continually added to our database as we learn about them over the course of the first and second quarters this year.
The average age of the economy hotel sold in 2019 was 33 years old, reflecting a 1986-build date. The oldest hotel sold was built in 1958, while the newest opened in 2017. The majority of economy hotels sold were built in the 1980s. The average size of the branded economy hotel sold in 2019 was 99 rooms.
Blackstone and Dune Real Estate Partners Take Advantage of 2019 to Streamline Their Respective Portfolios
Of the aforementioned 263 transactions, the big sellers in 2019 were Blackstone and Dune Real Estate Partners. Blackstone sold 67 Motel 6 and Studio 6 properties out of its owned portfolio; the company purchased the U.S. holdings of the Motel 6 and Studio 6 brands in 2012 from Accor for a reported $1.9 billion. Dune Real Estate Partners sold 19 Red Roof Inn hotels.