NATIONAL REPORT— We’re three-fourths of the way through the year and one thing has become crystal clear— hotel brokers in 2002 have been busier than ever trying to drum up business. Indeed, while a few notable transactions have come to the fore this year, according to property-marketers and industry-watchers, this has not been a fruitful year for hotel deal-making, particularly when weighed against numbers chalked up in 1999, 2000 and even 2001. This is despite the dramatic market dampening brought on by the events of 9/11. Accordingly, a HOTEL BUSINESS® poll of the business sentiments of the nation’s hotel brokers invariably shaped up as a look ahead, comparing expectations for the coming 12 months with the realities of the current year and, to a lesser degree, those years immediately preceding 2002. In line with facts and figures on hotel real estate transaction volume compiled through various sources by the Atlanta, GA-based Hospitality Research Group (HRG) of PKF Consulting, it is clearly far from a banner year for hotel brokers. Hotel real estate transaction volume in the U.S. during the first eight months of 2002 slowed to about 40% of the volume recorded in 2001, 2000 and 1999, according to HRG. Specifically, the group’s analysts identified approximately 195 sales year-to-date (through Sept. 1), as compared to 462, 553 and 409, respectively, during the same period of the past three years. (The cited number of 2002 transactions has been slightly understated to allow for some recent deals that have not as of yet been fully reported.) More Deals In New Year Small wonder then that 76% of those brokers responding to the HOTEL BUSINESS® survey can see closing more deals in 2003 than they did, and will, this year. Moreover, fully half of the respondents anticipate higher dollar volume to go along with next year’s higher deal volume as well. An additional 26% maintained the call as to whether 2003’s dollars-per-deal volume will be higher or lower is— at this time— too tough to call. As for reasons why deal volume has slipped so markedly this year, HRG executives suggested these could include reluctance by mortgage lenders to take positions in hotel markets damaged by recession and the terrorists attacks of last year, as well as large bid/ask spreads created by a lack of high-yielding reinvestment opportunities for sellers and the high return requirements of buyers. Meanwhile, prime potential deal-breakers going forward, as cited by those on the selling line, encompass: the general lack of available product and/or motivated sellers (57.4% rating it as their leading concern); an inability to raise sufficient and/or necessary financing (24.1%); and a paucity of serious, qualified, ready-to-do-business buyers (11.1%). Given that hopes are running high for a better year in 2003, the vast majority of those brokers canvassed maintain it is reasonable to expect they and their compatriots will continue to be a big part of the hotel buying and selling scene. In fact, fears of broker bypass seem to amount to little more than a minor irritant at the present time, what with 44% of this year’s respondents looking forward to more brokers shepherding hotel transactions next year, and an additional 42% maintaining brokers will be at least as involved in such activities as they are in 2002. On the other hand, in what might amount to a bit of wishful thinking, some 34% of hotel real estate brokerage professionals predicted 2003 would see a thinning of the ranks of those competing in the deal-making marketplace, while only 12% indicated there could be even more brokers out there beating the bushes in the coming year. Not surprisingly, more than half (54%) calculate there should be little change in the number of brokers/brokerage companies prospecting for business in the coming 12 months. Given the expectation there will be at least as many brokerage professionals on the scene in 2003, generally handling more deals and generating
