Florida hotels are changing hands much less frequently lately, thanks to COVID-19’s negative impact on the local economy. Orlando’s 500+ lodging properties are dealing with severely reduced revenue due to sparse tourism, and this is only contributing to the ongoing mass layoffs within the hospitality industry. Property owners are now facing some very difficult financial realizations that are putting them at odds with their lenders, partners, and ownership.
In Orlando, the number of hotel sales for the first eight months of 2020 declined 21% to 11%, down from 14% during the same time last year, according to Hospitality Real Estate Counselors (HREC). However, only six hotels have sold between March and August during the pandemic, the last sale recorded in mid-June. This reflects a decline of 45% from 11 properties for the same period in 2019.
Experts are stating there is a gap between what buyers and sellers consider to be the current value of the hotels. Buyers want significant discounts, while sellers are unwilling to drop pricing despite their economic hardships.
However, there was a glimmer of light in the average hotel sales price since the pandemic. The 11 transactions between March and August of 2019 totaled $119.83 million, averaging $10.89 million per transaction. This year’s combined total for all six properties was $70.85 million, making the average $11.8 million.
“Other opportunities during this period will come from owners who ‘give the keys back’ to the lenders because they see no return on their equity for the extended future,” said Paul Sexton, Vice President of HREC in Orlando.
Looking to the future of hotel sales in Central Florida may be gauged by looking at the past. For example, when hotel sales slowed during the Great Recession, the most rapid improvement was at least two years after bottoming out in mid-2009. Let us all be hopeful that the slump is shallower than we think, and a bounce back will not take as long as it did during the Great Recession.
It is always a great idea to discuss any potential hotel purchase or hotel sale with your Florida Hotel attorneys at Gulati Law. Contact us today!