As part of the Americas Lodging Investment Summit’s Patron sponsorship program, conference organizers asked CBRE’s Kevin Mallory eight timely questions as we prepare for the 21st annual event taking place January 24-26, 2022, at the JW Marriott/Ritz-Carlton Los Angeles L.A. LIVE. Following are her responses.
How would you characterize the current transactions climate in the U.S. hotel industry and how long do you think those conditions will remain in play?
Market activity is robust driven by recovering fundamentals, strong liquidity in both the debt and equity markets, and a global thirst for higher yielding investments. We do not see a dissipation in activity over the near to mid-term.
What hotel asset type do you think will be the most popular to trade hands in 2022? Why?
The “Smile states” will continue to drive most of our activity for reasons well known to all. We do expect to see activity move north and into major urban markets as we see life making its way back into convention centers coupled with a recovery in business travel. We also expect to see an increase in opportunities derived from distress – but not necessarily distressed pricing. Select-service and resort product will continue to be highly sought.
Do you foresee more portfolio transactions or individual asset transactions during 2022? What will drive that?
Consolidation and M&A activity will pick up as the cycle matures. This activity will be driven by a need for scale and continued pressure from the debt and equity markets as well as product/opportunity scarcity driven by a demand supply imbalance.
What about all the “dry powder” that we keep hearing about—when will there be an opportunity for the capital currently sitting on the sidelines to be invested in hotel assets and what might those deals look like?
Capital should not be sitting on the sidelines. There is clearly an imbalance in that we have very strong liquidity in the capital markets creating a hunger for opportunity that is not currently satisfied by supply.
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?
Global Capital flows, the delta between treasuries and entry yields for the sector, fed support of the bond market, and underlying fundamentals are all ingredients in the mix. No single indicator marks a shift – we watch them all.
What do you think will be the mindset of lenders in general through 2022? Will lenders loosen the purse strings during that time?
Lenders are extremely active. As mentioned previously, liquidity is high and there is no shortage of debt capital at attractive terms for well-conceived and well sponsored deals – lenders have loosened the purse strings.
What one trend in the brokerage world right now makes you feel most comfortable about 2022?
Our clients understand more than ever the value of a well-integrated global platform being scaled and managed for their benefit. At CBRE Hotels we have multiple lines of business focused on the hotel sector that can be brought to bear as needed: sales, finance, advisory, valuation, asset management, project management, and banking. All of this layered with our ability to facilitate the movement of capital and opportunities across borders and around the globe have allowed us to distance ourselves from our competitors.
What’s the one takeaway people should know about Kevin Mallory?
Passions: I) Cruising the Salish Sea & Desolation Sound with my wife Julie and boat dog Milly; II) CX/Road/MTB (cyclo-cross/road/mountain biking); and III) CBRE Hotels Team.