RLJ Lodging Trust
) recently bought the long-term leasehold interest in a Hawaiian
asset - Courtyard by Marriott Waikiki Beach - for $75.3 million.
With the acquisition of this top-class property, the company
hopes to expand its geographic footprint and strengthen its
presence in the western part of the U.S.
The acquisition cost represents a forward capitalization rate
of roughly 7.8%, based on the property's estimated net operating
income (NOI) in 2014. Notably, the lodging real estate investment
trust (REIT) financed the purchase wholly with available cash in
Courtyard by Marriott Waikiki Beach - one of the premium
Marriott International, Inc.
) branded hotels - boasts 399 rooms and is situated in Honolulu,
on the Hawaiian island of Oahu. The hotel is strategically close
to Waikiki Beach and other various well-known tourist attractions
of the region.
Including Courtyard by Marriott Waikiki Beach, RLJ Lodging now
owns 149 assets located across 22 states and the District of
Columbia. The property's Revenue per Available Room (RevPAR) -
which is over 40% premium to the RLJ Lodging's pro forma RevPAR
in 2012 - is expected to be among the company's top-notch hotels
and it further fortifies its overall portfolio mix.
Strong Leisure Market
The Oahu market is emerging as one of the top hotel markets
and tourist destinations in the U.S. According to Smith Travel
Research, Inc. (STR), Oahu market experienced 16.7% growth in
RevPAR in 2012. Notably, year-to-date through April 2013, RevPAR
continued increasing with 17.9% year-over-year growth.
Moreover, Honolulu, one of the foremost tourist destinations
in the U.S., is ranked the fourth highest port of entry for
international travelers. According to the Department of Business,
Economic Development & Tourism, visitor arrivals upped 9.6%
and their spending jumped 18.5% year over year in 2012. This was
registered mainly on the back of a strong influx of travelers
from Asia and the South Pacific region - leading to beat the
historical peak number of visitor arrivals and spending in
pre-recession times, 2006 and 2007.
In particular, RLJ Lodging expects the property's RevPAR to
gain from the impetus in the leisure and hospitality sectors as
well as demand from the U.S. military, which has a striking
presence on the island. Moreover, with the demand remaining
high and supply considerably low, RLJ Lodging anticipates the
acquired property to benefit going forward.
We view the above-mentioned transaction as a strategic fit for
RLJ Lodging. Moreover, we expect the property's strong brand
connection and prime location to help RLJ Lodging in experiencing
significant growth in Oahu.
However, other lodging REITs are also making efforts to
explore emergent opportunities in this particular market with
their premium buyouts. Earlier this month,
Host Hotels & Resorts Inc.
) bought a Hawaii-based property - Hyatt Place Waikiki Beach -
for $138.5 million. Thus, RLJ Lodging needs to achieve
competitive edge over them, with sufficient efforts in value
Currently, RLJ Lodging carries a Zacks Rank #3 (Hold). Better
performing lodging REITs include
Sunstone Hotel Investors, Inc.
) with a Zacks Rank #1 (Strong Buy).
HOST HOTEL&RSRT (HST): Free Stock Analysis
MARRIOTT INTL-A (MAR): Free Stock Analysis
RLJ LODGING TR (RLJ): Free Stock Analysis
SUNSTONE HOTEL (SHO): Free Stock Analysis
To read this article on Zacks.com click here.