Skip to content

In what is generally known as the hottest tourism market in the world — a record 75 million people visited Orlando last year — hotel sales have dropped off a virtual cliff.

So far this year, eight hotel properties have traded hands in the Orlando-Kissimmee MSA. For comparison, that’s the same number that sold last year just in the month of December – a month that was led by the nearly $900 million sale of the Ritz Carlton and J.W. Marriott.

While there’s always a flurry of deals to close out the year, the numbers for the first two quarters year over year also show a dramatic decline. The 2019 year-to-date sales total about $72 million. This time last year, 19 hotels had transacted for nearly $312 million.

“The hotel sales transaction market is down, both locally and nationally,” HFF Managing Director Michael Weinberg said. “But debt markets are very liquid and aggressive. A lot of folks are electing to refinance their assets and produce good cash on cash returns.”

Michael Weinberg is senior managing director of HFF Orlando.
Michael Weinberg is senior managing director of HFF Orlando.

The economic recovery cycle that started in 2009 peaked for hotel sales in 2015, when more than 40 assets traded in Orange County alone and another dozen sold in Osceola County. The sales volume was fueled largely by the high number of foreclosed and distressed properties that were scooped up by private and institutional investors, according to HREC Vice President Paul Sexton.

“In early stages of cycle, Florida was really hot,” he said. “We did a lot of transactions, in part because there was a lot of available supply from the banks. Then we started to dry up.”

Hollywood-based AD1 Global has been one of the most aggressive buyers in the Orlando market in this cycle. The company closed out 2018 with a portfolio buy that included two Orlando assets, bringing its total number of hotels in the market to seven.

Chief Financial Officer Alex Fridzon told GrowthSpotter the company hasn’t found a deal to its liking this year. “On our side, we’re still active in trying to buy in the Southeast in general, and in Orlando,” he said. “Our hotels are doing well. We want to buy more.”

There’s a general lack of supply because institutional investors are holding onto their assets longer. They’re only considering off-market deals, and when they do entertain offers, they’re pricing aggressively.

“There’s an ask-gap between buyers and sellers. I think it’s farther than it should be,” Fridzon said.

Even when they do find common ground, the scarcity of hotels on the market is also making it harder for sellers to find suitable properties to complete a 1031-exchange, which only compounds the problem.

“The days of buying an asset and flipping it in three to five years are really few and far between,” Weinberg said.

Tampa Bay hotelier Ben Mallah is of the few investors who has sold a hotel property in 2019 when he divested of the Hawthorne Suites on I-Drive in April for $14.4 million – admittedly less than he would have liked.

Now he’s looking to sell the Four Points Sheraton Orlando, which he purchased in 2016 for $23 million, as part of a three-part portfolio offering that also includes the Courtyard Orlando Lake Buena Vista, acquired in 2017.

The Sheraton’s iconic, sphere-topped cylinder now must compete head-to-head with Universal’s gigantic new Surfside Inn & Suites, which opened in June. The first phase of Universal’s Endless Summer Resort added 750 budget-friendly rooms to the I-Drive submarket. Its second phase will boost the inventory by another 2,000 rooms in 2020.

“I think it might be scaring a lot of buyers off because of all the new construction by Universal,” he said. “They’re flooding the market with new product, but there’s still plenty of business to go around.”

Fridzon agreed. “Before, we had record tourism numbers without the supply coming in,” he said.

Paul Sexton is vice president of HREC Orlando, a brokerage that exclusively represents the hospitality industry.
Paul Sexton is vice president of HREC Orlando, a brokerage that exclusively represents the hospitality industry.

But Weinberg said the drought won’t last forever, as hotel demand outpaces supply. He currently has two hotels under contract, both upwards of $20 million, and he knows of several more contracts on other properties.

“I do think there will be more volume in the second half of the year,” he said. “Star Wars will really be a 2020 demand driver. Plus, you’ve got the airport expansion and the (Orange County Convention Center) will undergo a $600 million renovation and expansion. And then you’ll have the new Universal park.”

Sexton believes the construction at Universal’s third gate could drive up occupancy well before it opens. Even if the theme park is developed in phases, the massive scale of the build will likely force the company to import labor.

“This is my personal theory,” he said. “My guess is that contractors will have to book up for months — if not a year at a time — some of the economy hotel rooms, which will take those out of the mix for transient occupancy. And then, when it does open, it’s going to be huge.”

Have a tip about Central Florida development? Contact me at or (407)420-6261, or tweet me at @LKinslerOGrowth. Follow GrowthSpotter on Facebook, Twitter and LinkedIn.