The Hawaii hotel investment market remained positively buoyant through the first half of 2015. The continued strength is driven by improved visitor metrics, better bottom line hotel performance and lower investor yield requirements. Sellers are finding this an ideal time to cash out.
(first half of 2015 vs. the first half of 2014)
|Air Seats||Up 6.9%|
|Visitor Arrivals||Up 4.5%|
|Visitor Spending||Up 3.5%|
Hotel Performance Metrics – Year-to-Date 2015
Comparing the first half of 2015 with the first half of 2014, the State of Hawaii experienced a 2.1% increase in occupancy, a 4.5% increase in ADR and a 6.6% increase in RevPAR. RevPAR was up on all islands with Kauai up 7.9%, Maui up 11.9%, Big Island up 8.9% and Oahu up 3.2%.
Hawaii Hotel Transactions
The Hawaii hotel investment market is returning to the heady pre-Lehman days. In Hawaii, over the past 3½ years, there have been 38 hotel transactions totaling $3.4 billion. The price per room was $293,000 and the weighted average going-in cap rate was 6.0% . In the first half of 2015 eight hotels totaling 2,419 rooms sold for $481 million or $199,000 per room. The weighted average going-in cap rate was 4.8%.
|# of Transactions||8||6|
|# of Rooms||2,419||1,770|
|Total Sales Volume||$481M||$501M|
|Price per Room||$199K||$282K|
|Going-In Cap Rate||4.80%||6.50%|
Some of the larger transactions in 2015 include:
- Oaktree & Woodbridge sold the 542-room Fairmont Orchid to Mirae Asset Management for $220M or $400K / key
- Blackstone sold the 545-room Marriott Waikoloa to a group led by Ed Mace for $68M or $124K / key
- YHB Koreana sold the 314-room Queen Kapiolani to ProspectHill Group for $51M or $163K / key
- The 600-room Maile Sky Court sold to Clearview for $103M or $171K / key
- Other than the Marriott Waikoloa, the sellers were able to achieve a large capital gain in a relatively short hold period.
Hotels on the Market
There are currently very few hotels being actively marketed. Investors are frustrated by how few opportunities exist, both in Hawaii and the mainland US. Currently the 226-room Park Shore and the 121-room Koa Kea are on the market. I anticipate more hotels will be coming to market as owners take advantage of a strong, stable visitor market, cheap debt and lower investor yield requirements. Therefore, I predict hotel sales volume to increase in the second half of 2015.