Welcome to my article where we explore the impact of increased foreign travel on the hospitality industry. Following the reopening of international borders, cities like London, New York, and Tokyo have emerged as hotspots for hotel investment. This surge in travel has resulted in record-breaking revenue per available room (RevPAR) in many urban markets. In this article, we'll delve into the reasons behind this growth and the expectations of investors. So, let's dive in!
The Appeal of Urban Markets for Hotel Investment
Discover why global urban markets like London, New York, and Tokyo are attracting hotel investors.
Urban markets such as London, New York, and Tokyo have become highly appealing for hotel investment in recent times. The reopening of international borders has led to a significant increase in foreign travel, resulting in record-high revenue per available room (RevPAR) in these cities. Investors are gravitating towards these urban markets due to the presence of luxury assets with in-place cash flow that cannot be replicated easily.
London, with its historically high average daily rates, has experienced a remarkable 20% growth in RevPAR through August. Although occupancy rates are still recovering, investors are confident that RevPAR will continue to rise in the coming months. New York City, on the other hand, has emerged as the most liquid global hotel market, attracting both domestic and foreign investors. With $2.5 billion in hotel transaction volume in the first nine months of the year, it is a hotspot for investment.
Tokyo, despite a decline in Chinese travel, has witnessed a significant improvement in hotel performance. The weakening of the yen has attracted more European travelers, and travel from China and the U.S. is expected to increase. Tokyo's hotel transaction volume reached $969 million in the third quarter, making it one of the most promising markets for investment.
The Performance of New York Hotels
Explore the performance of New York hotels and the optimistic outlook for investors.
New York City's hotel market has been thriving, with RevPAR up by 8.3% through August compared to 2019. This growth is expected to continue, as 86% of investors surveyed anticipate further improvement in performance. The city has seen a mix of domestic and foreign investors, with notable transactions like QUI's $623 million purchase of the Park Lane Hotel in September.
Despite the high cost of capital and debt market volatility, luxury assets and select-service and extended-stay hotels have been benefiting from strong traveler demand. Luxury hotel pricing reached a near-all-time high of $624,000 per key in the first nine months of 2023, and investors expect it to increase further to $725,000 per key in the next 12 months. Select-service hotel pricing, although currently down by 7.6% to $163,000 per key, is expected to return to pre-pandemic levels in the coming year.
London's High Average Daily Rates and Future Growth
Learn about London's historically high average daily rates and the growth potential for the city's hotel market.
London has experienced historically high average daily rates, which have contributed to a remarkable 20% growth in RevPAR through August. Although occupancy rates have been impacted, all investors surveyed are optimistic about the future growth of RevPAR in London over the next 12 months. While the hotel investment volume declined to $440 million in the first nine months of the year, experts expect it to pick up in the coming year.
Tokyo's Improved Hotel Performance and Future Prospects
Discover how Tokyo's hotel performance has improved and the future prospects for the city's hospitality industry.
Despite a decline in Chinese travel, Tokyo's hotel performance has shown significant improvement since the beginning of the year. Through August, RevPAR was down by just 14.5% compared to 2019. The weakening of the yen has attracted more European travelers, and with the expected increase in travel from China and the U.S., the future prospects for Tokyo's hospitality industry look promising. In the third quarter alone, Tokyo's hotel transaction volume reached $969 million, marking it as one of the top markets for investment.
Investment Opportunities in the Hotel Sector
Explore the investment opportunities in the hotel sector and the areas that have benefited from strong traveler demand.
While overall investment activity in the hotel sector has been limited due to the high cost of capital and debt market volatility, there are still opportunities to be found. Luxury assets, as well as select-service and extended-stay hotels, have seen positive results due to strong traveler demand. Despite the expensive debt, luxury hotel pricing has reached a near-all-time high, and investors expect it to increase further in the next 12 months. Select-service hotel pricing, although currently lower, is projected to return to pre-pandemic levels in the coming year.
