Hotel sales across the world haven’t just taken a hit amid the coronavirus pandemic but have flat out tumbled compared with last year — by half in this year’s first five months and by 87% in the second quarter.
Globally 113 hotels sold since April 1 until late June, an 86.7% drop from the 850 hotel sales from last year’s second quarter, according to New York-based commercial real estate data and analytics provider Real Capital Analytics Inc.
Real Capital cautioned against betting on a market rebound as the outlook remains gloomy as a result of a still increasing global infection rate and decreasing travel demand.
“The long-term impact of the virus on both tourism and business sectors is unknown and difficult to forecast,” Tom Leahy, senior director at Real Capital’s EMEA Analytics, wrote in a June 29th report.
The global demand for flights by passengers is expected to be halved for the year, according to airline trade association International Air Transport Association. Roughly 7.5 million flights were canceled since the start of the year.
A closer look shows the US, Europe and Asia Pacific each experienced a decline in hotel deals.
The US experienced a “minuscule” transaction dollar volume from April 1 to June 28 with 48 hotels trading for a total $678 million, according to the Real Capital report. In comparison, the average monthly volume in the last five years is $2.8 billion.
In Europe, 36 hotels sold since April 1 yet the dollar volume is bigger than that of the US at more than $1 billion. That’s because the US saw a drop in the size of assets traded, while Europe logged some large hotel sales.
In the US, the average lot size of the assets traded dropped by a third compared with the five-year average. Europe counts the $270 million sale of luxury Bauer Palazzo in Venice among its big asset trades. Austria-based investor Signa Group bought the 210-key hotel for $1.3 million per key, the priciest hotel trade in the second quarter.
Still, Europe is grappling with a hotel demand slump as six hotels sold in June, likely putting the month in history books for having the fewest hotel deals on record, according to Real Capital.
Popular European travel destinations Greece, Portugal and Spain have said they will reopen for the summer months, which will give more of a clue whether and how much travel will pick up despite the still looming coronavirus threat.
If the Asia Pacific market is used as an indicator, then the outlook doesn’t look significantly brighter in terms of hotel transactions.
“Despite the fact the region was the first to experience COVID-19 and many of the largest countries have been out of full lockdown for longer than Europe and US, this has not fed through to sales,” Leahy wrote in the report.
Since April 1, 29 hotels were bought in Asia Pacific with some big properties under contract such as Shanghai’s the Guoman for a proposed $460,000 per key.
Real Capital cautioned that the sale isn’t a done deal until finalized as at least three deals fell through since March in light of the drop in travel resulting from the pandemic and ensuing investor insecurity.
The World Health Organization reported the global infection rate continues to increase, which means stay-at-home and social-distancing recommendations remain.
“With international travel such a driver of hotel occupancy,” the Real Capital report said, “the longer these the persist, the worse the outlook.”