A flurry of transaction activity suggests that the first half of the year may have been an inflection point for the US hotel sector. OurNYC reporter Amanda Marsh sat down with CBRE hotel guru Dan Lesser, senior managing director of the firm’s hospitality & gaming group, who tells us that long-anticipated green shoots are now slowly appearing.

B: What’s the hospitality sector looking like right now?

Dan: We’ve experienced a real turnaround in operating metrics due to the economy bottoming out, and the sector is much stronger. But now we’ve hit mid-year, and there’s a question as to where the economy is steering. The sector is very susceptible to immediate changes in the market, as rooms are re-priced every night. For instance, hotel room night demand on Sept. 12, 2001 was dramatically different from market demand that existed 48 hours earlier on Sept. 10.

B: How about transactions?

Dan: There’s a loosening up of debt, and the bid-ask spread has narrowed. Transactions have already started picking up: There were over 40 worth $10M or more in the first half of the year, including the$200M sale of the Tropicana Casino & Resort in Atlantic City, the$155M sale of the Hilton Minneapolis, and the $95M sale of DC’sSofitel Lafayette Square. By comparison, during the first half of ‘09 there were merely a handful of transactions. At this point, even if we enter into a double-dip recession, there is perceived long-term upside in the market and it’s not a question of if, but when we recover. Simultaneously, the inventory of attractive opportunities remains fairly constrained, given the reluctance of lenders and others who control assets to dispose of them at today’s depressed pricing levels.

B: Who’s buying?

Dan: We’re seeing everyone from opportunity funds to private equity looking at hotels. There’s an awful lot of raised committed capital earmarked for hotel investment, and there will be opportunities for superior risk-adjusted returns and value-enhancement plays. Hotels are terrific hedges against inflation. Savvy hotel investors are looking in 24/7 downtown urban locations and cities with high barriers to entry. The value of many existing opportunities today is also below the replacement cost, and since construction financing isn’t available, it will be a long time before significant amounts of new hotel supply comes online.

B: What are the opportunities?

Dan: It’s anticipated that there will be desirable investment opportunities at all levels of the hotel capital stack. Such prospects include: origination of myriad lodging real estate loans, the acquisition of performing and non-performing hotel loans, structured mezzanine positions, and direct investment in individual assets and portfolios. Similar to the rebound from prior downturns, investors are seeking opportunities to inject capital in addition to acquisition costs, and to turnaround, reposition and/or rebranddistressed hotel assets with the goal of achieving maximum capital appreciation and, to a lesser extent, current income. As better assets are brought to market, competition to win bids will be stiff, as significant amounts of all types of stockpiled domestic and international capital looks to restructure or acquire US lodging value-enhancement opportunities.

B: Are there any particular investors who stand out?

Dan: Recently, we’ve seen an increase in hotel-centric REITs— smart money that knows and understands the hotel business, and has proven track record of public market success. For example,Pebblebrook Hotel Trust was founded by Jon Bortz, who previously founded and successfully grew LaSalle Hotel Properties (yesterday, Bisnow had an interview with Pebblebrook’s Ray Martzin our DC issue). This year, it purchased the 416-room Sir Francis Drake Hotel in San Francisco from Chartres Lodging Group for $90Mand the 269-room Doubletree Hotel in Bethesda from Thayer Lodging Group for $67.1M. Another recently minted hotel REIT with a proven hotel investment management team, Chesapeake Lodging Trust, recently purchased the 498-room Hyatt Regency in Boston from Hyatt for $112M.  For full report click here from Bisnow….