FALL 2015 California Hotel & Lodging Association 7 B& Bs What is Selling & Who is Buying By Kathryn Seo, Vice President, Lodging Brokers network, inc. THE SALE OF BED AND BREAKFAST PROPERTIES AND INNS has been very strong the last two years, but what has actually been selling? B&Bs in primary markets, with good-sized owners’ quarters and strong cash flow have been the trend in sales the last two years. Properties in secondary or tertiary markets, or even a secondary location within a primary market have struggled to sell or have sold at materially higher cap rates than other B&B offerings. Buyers, lenders and appraisers see risk in seasonality and value B&Bs in outlying markets accordingly. Over the last couple years Lodging Brokers network, inc. has seen California B&B cap rates range from 5% to 13%. As sales and comps have increased, sellers can no longer apply a general cap rate or multiplier to their property, the specifics of the property and location will materially affect value. i frequently get asked: who is your typical B&B buyer? There are several pools of B&B buyers, and they have been changing. Probably the most common B&B buyer is a couple that has already had successful careers in other fields, aren’t ready to retire, and want to do something different with their lives. Another B&B buyer group that has been on the rise is hotel owners. Many hotel or motel owners have recognized the popularity of “boutique” inns and have been moving into the B&B space accordingly. Asian investors are also purchasing B&Bs, primarily only in very popular tourist markets. All of these buyer groups have become very sophisticated and they are looking for strong cash flow. The B&B buyer who falls in love with an Inn and will pay any price is becoming a thing of the past; buyers view these properties as an investment and they need to make sense financially. Today’s buyers love the potential of upside but won’t overpay for it. Strong B&B sales are expected to continue, but they are dependent upon the current combination of low interest rates, increasing revenues and strong market fundamentals. The adjustment of any of these factors will make an impact on values. Lodging Brokers Network, Inc. specializes in the sale of lodging properties including Hotels, Motels, Resorts, Inns and Bed and Breakfasts, and has become the #1 B&B and Inn Brokerage Firm in California. www.lodgingbrokersnetwork.com.
CH LA Lodging News Fall 2015
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