Chatham Lodging Trust, a lodging REIT, sold four hotels – three in Texas and one in Massachusetts – for a total of $80 million, taking advantage of a recovery in leisure travel to recycle capital out of older assets into newer properties.
Chatham’s focus is on upscale and extended-stay hotels, which are becoming more attractive post-pandemic. Even as room rates rise, the market for these kinds of upscale stays is holding strong, and Dallas and Houston in particular are benefitting from the recovery.
“For the last 18 months or so, the hotel recovery has been completely driven by leisure travel, in particular weekend leisure travel, and so markets that can accommodate that have recovered very strongly, said Daryl Cronk, director of Hospitality Analytics at South CoStar Group, a leading commercial real estate marketplace.
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Chatham Lodging Trust currently owns about 39 hotels with 5,914 rooms/suites in 16 states and the District of Columbia, according to the press release. The sale will provide cash for future acquisitions as the REIT acquires newer hotels, CEO Jeffrey H. Fischer said in a statement.
“These are home-run transactions. We have emerged from the pandemic with a stronger balance sheet and have the capacity to make value-enhancing acquisitions and generate incremental distributable cash flow,” he said.
In Dallas, average occupancy rates are now 70.2, just shy of the pre-pandemic level of 70.4, while revenue per available room, or RevPar, is 85.97, above the May 2019 level of 80.25, according to data from STR, a division of the Costar Group that specializes in hotel market data. For Houston, average occupancy rates are now 62.8, a slight decline from the pre-pandemic level of 67.8, while RevPar is 69.73, below the May 2019 of 74.66.
“They’re still a little behind pre-pandemic levels,’’ Cronk said. “There’s an encouraging sign in the Dallas market, hotels in March and April of this year have reached back to similar levels in 2019, pre-pandemic. We are starting to see conventions and group meetings come back.”
Houston is likely lagging behind because it was more reliant on corporate travel than leisure when compared with Dallas, according to Cronk. Corporate travel hasn’t reached pre-pandemic levels.
Chatham Lodging Trust is among many investors that are taking advantage of this rise in the leisure market, said Cronk.
“We are seeing more hotel acquisitions and sales in general in places like Tampa, Florida,’’ he said. “As more hotels are occupied by weekenders and willing buyers, they have to meet certain standards in order to keep up with their brand, and the pressure to invest in improved lodging and upscale amenities is perhaps part of what has motivated many transactions like Chatham’s.’’
Hotels have to plan for capital expenditures to keep up with the standards required by the big hotel brands. A lot of that spending got put on hold during the pandemic and many hotels now have to catch up.
The properties sold by Chatham consist of the 180-room Hilton Garden Inn at 5 Wheeler Rd, Burlington, Massachusetts; the 100-room Courtyard by Marriott Houston West University at 2929 Westpark Dr, Houston, Texas; the 120-room Residence Inn by Marriott Houston West University at 2939 Westpark Dr, Houston, Texas; and the 137-room Homewood Suites by Hilton Dallas Market Center at 2747 N Stemmons Fwy, Dallas, Texas. Altogether the hotels comprise 537 total rooms. A Chatham spokesperson declined to name the buyer or the price.
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