Hotels & Hospitality Development News in Central Florida

Orlando hotel sales fall in 2016 from prior peak, but fundamentals signal strong 2017

The Embassy Suites in Downtown Orlando, on Pine Street near Lake Eola, which carried the highest price per key of any hotel transaction in 2016.

The Greater Orlando market reported 39 individual hotel transactions in 2016 totaling $462 million in value, figures down significantly from what was an explosive 2015, but better reflective of macroeconomic and capital market dynamics that may continue this year.

Questions loom over how commercial real estate investment, debt and equity markets will respond this year to fiscal policy out of Washington, D.C. But the Orlando-area economy has never been more dynamic, with its submarkets and job diversification continuing to blossom, said Paul Sexton, vice president of HREC Investment Advisors, a national brokerage offering consulting, development and asset management services to the hotel industry.


"People are coming to understand all the great things going on in Orlando, the demand generators we're adding, and how our government entities are keeping up with the private sector in terms of road improvements," he said. "Orlando is more diversified than outside investors think, but we're hearing that more are looking at Orlando as a safe-haven investment."

Sexton publishes an annual report each February that sums the sale, acquisition and new build activity for the roughly 500-property hotel market in Orange, Lake, Seminole, Osceola and Polk counties.


Provided to GrowthSpotter this week, the data shows 2016 highlighted by a sales decrease across the board, which was in line with an estimated 40 percent decrease in hotel sales nationwide.

Hotel transactions for Greater Orlando totaled 39 in 2016, down from 68 the year prior. That figure includes 33 single-asset sales (down from 52 in 2015), four corporate/portfolio sales (down from 12), and two foreclosures (down from four).

Sales volume for single-asset hotel transactions totaled $378 million, down from $595.6 million in 2015. Corporate/portfolio sales totaled just $98.3 million, down 95 percent from the year prior.

Single-asset sales are the best indicator of hotel sales activity for a market, as portfolio/corporate deals can be large outliers that skew market results from year to year.

Greater Orlando's total hotel sales summed $462 million in 2016, down from $2.44 billion the year prior, which had been a record year inflated by a handful of luxury properties changing hands.

"The fact is this investment cycle has lasted longer than imagined without a recession, and most investors like their portfolios and are holding their properties," Sexton said. "If they sold a property they'd have to go out and buy another of equal value, but the risk is greater because they'd have to go get financing" in a climate of rising interest rates, which presents the challenge of replacing a relatively cheap loan with a more expensive one.

The market's average single-asset sale value was $11.45 million, on par with $11.4 million in 2015, though the average price per key was $67,100, up from $56,400 in 2015.

Top transactions during the year included the Orlando Airport Marriott Lakeside sale in June for $64.3 million ($132,000 per key), and the Embassy Suites Orlando Downtown selling for $35.4 million last March ($211,700/key), both figures being full sale prices -- including the value of tangible personal property that's not always reflected on the deed -- as reported by Real Capital Analytics.


The Doubletree at UCF sold for $25.7 million in March ($104,700/key), the Doubletree by Hilton Orlando Airport in June for $28.5 million ($80,736/key), and the Holiday Inn Orlando-Disney Springs in December for $24 million ($74,100/key).

Nearly half of the single asset sales involved properties in the Kissimmee East or West submarkets, with significant appreciation from prior year sales.

"We like the fact that people are voting with their dollars on the ongoing rebound in the 192 corridor," Sexton said.

The top corporate/portfolio deal last year involving local hotels was the $88.1 million paid in June for a trio of properties known as the Marriott Village in Lake Buena Vista, southwest of Little Lake Bryan ($80,181/key). That price was reflected by sale deeds, and may be higher with tangible personal property.

Last year was notable for the number of flag conversions, repositionings of hotel supply to timeshare, and bulldozings that involved 11 local properties.

Conversions included a foreclosed former Nik Patel hotel on Apopka-Vineland Road into the U.S. market's first Delta Hotels branded-property in April, the 774-room Nickelodeon Suites Resort to a Holiday Inn Resort, the 1,014-room Lake Buena Vista Palace to the Hilton Orlando Buena Vista Palace Disney Springs which completed in October, and the 516-room Home Suite Home to the Red Lion Hotel Orlando-Kissimmee Maingate that completed in November.


Notable bulldozings included the Royal Inn & Suites at the I-4 and S.R. 46 interchange in Sanford to make way for two select service hotels, and the former Residence Inn on Lake Cecile along Kissimmee's W192 corridor.

"For the first time in years we are seeing the bulldozing of properties and deletion of some supply," Sexton said.

Timeshare repositionings included the former Lake Eve Resort to Bluegreen Vacations in July, and the former Westin on Universal Boulevard to Hilton Grand Vacation Club last January.

Nine new hotels opened in 2016 adding 2,314 new rooms to the market's supply, with Greater Orlando closing the year with roughly 123,500 rooms overall.

Eight new properties currently under construction are expected by Sexton to open this year, which would introduce another 1,597 rooms to the market in 2017. Those are led by a 300-room first phase of The Grove Resort & Spa projected to open in the first quarter, and the 400-room addition to Cabana Bay Beach Resort at Universal that has been forecast for a third quarter opening.

Replacement cost is still above acquisition cost by about 30 percent in Greater Orlando, Sexton estimates. Value is not accelerating at the pace it was three years ago, he said, so the market isn't near the point of 15-20 percent above replacement cost that prompts greater focus on new development.


"So transactions are still a good deal in Orlando, and investors don't have to worry as much about new supply," he said. "The new projects you are seeing done that really move the market are by Universal, which has built more rooms in the market than anyone else in this cycle. But their economics are different from any other developer."

Have a tip about Central Florida development? Contact me at, (407) 420-5685 or @bobmoser333. Follow GrowthSpotter on Facebook, Twitter and LinkedIn.