As part of the Americas Lodging Investment Summit’s Patron sponsorship program, conference organizers asked JLL’s Kevin Davis eight timely questions as we prepare for the 21st annual event scheduled for January 24-26, 2022, at the JW Marriott/Ritz-Carlton Los Angeles L.A. LIVE. Following are his responses.

What one word best describes the overall hotel capital markets in the U.S., and why did you choose that word?

“Bifurcated.” The markets are truly bifurcated in the sense that there’s an incredibly strong bid for assets that cater to leisure transient, while full service urban assets that appeal to group are much more challenged. This dynamic is true in both the debt and equity markets.


When considering all sources of capital—including banks, life insurance companies, debt funds, mezzanine providers, and CMBS lenders—which source(s) do you think will be the first to aggressively jump back into the hotel space? Why and when will it happen?

The debt funds have been the most active over the past year, but over the course of 2021 we’ve seen banks and the SASB CMBS market get more active and aggressive. This has happened over the course of 2021, and we expect this trend to continue.


What are the two or three hottest markets in terms of deals getting done? What’s driving that activity?

Austin and practically everything in Florida. The drivers are job and population growth, coupled with strong leisure trends.

Assess the bid-ask spread at the moment. How does it compare to pre-pandemic levels and what will it look like in 12 months?

Prices for assets in many leisure markets are at or have exceeded their 2019 levels, which is driven by strong operating performance and fundamentals. In many urban markets, the pricing has not yet gotten to a level to attract significant capital. The discounts to 2019 really vary depending on the asset, market and whether it’s union.


How will the labor shortage affect the hotel transactions environment? Will buyers be more wary because of the potential uncertainty?

The difficulty of attracting labor and higher wage rates have been the most significant operational challenge facing owners post COVID. As a result, owners are rightfully underwriting higher labor costs and are assuming greater operational efficiencies because it may be difficult to fill all open positions.


What hotel asset type do you think will be the most popular to trade hands in 2022? Why?

Resorts will continue to attract the most capital in 2022. It’s become clear that COVID will be with us for a while, which has benefitted resort assets. The protracted nature of the pandemic will see this trend continue.


What one or two overall economic indicators do you watch closely as the signal(s) for the next phase of the transaction market to begin? Why?

Big picture, I think it’s important to focus on the actions of the Fed and the major central banks globally. The central banks of the developed countries have pumped $10 trillion of liquidity into the markets since the start of COVID, which has been the biggest driver of the recovery of asset prices.


What’s the most relevant bit of business advice that you would give to hotel investors as they look to continue along the path to recovery?

Prices for assets that cater to leisure demand are priced to perfection, so now is a great time to focus on assets and markets that have experienced less liquidity and where you can get discounts to 2019 pricing. Big box assets and assets in markets like New York, Boston, San Francisco, and Chicago could offer great opportunities in 2022.