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Posted: Friday, 03 May 2013 6:22AM

New Orleans hotels are the inn thing for investors



This weekend's JazzFest crowd is just one reason hotel operators like New Orleans.

Area hotels are hot properties for investors, as investors see the hotel and tourism market here surpassing its pre-Katrina peak.

"The New Orleans market is emerging as a very strong tourism hotel market in the south at this point," says real estate analyst Wade Ragas.

"2013 started off with about eight properties being sold, all at near record prices."

He points to last month's sale of the W New Orleans on Poydras Street to Chesapeake Lodging for $65 million.

"The price was up around $255,000 a room and that is a very big price, indeed," Ragas says. "It's higher than the transaction price for the Windsor or for the Royal Orleans just a couple of years ago."

And, Chesapeake plans to spend another $29 million on renovations at the Poydras property beginning next April. The hotel will keep the W brand name.

Meanwhile, the whole group of Marriott's in New Orleans have traded, that are various parts of the Mariott brand. "They're trading above $155,000 a room," says Ragas. "So, those are also extraordinarily strong prices for this market."

The buyers are, in almost all these cases, national or international operators.

New Orleans ranked ninth out of the top 25 markets for revenue per available room in 2012 and second in growth for revenue per room making it an attractive market for investors.

"Hotel occupancies are good, room rates are rising, and we have a pretty steady backlog, right now, of major conventions."

Smith Travel shares a similar view of the New Orleans market.

"Smith Travel has become fairly optimistic about the rate of growth in average daily room rate here, that will continue fairly strong. And they're not looking for much fallback at all in the record high occupancy levels that we've achieved," according to Ragas.

"Until there's a lot of new construction. There's hasn't really been a brand new hotel, from scratch, here in about ten years. We used to add 200 to 300 rooms or more a year here. We haven't done that in a long time. We've had renovations...property brought back from Katrina, but as far as a brand new facility from scratch, there's been very little done since Katrina."

And, right now, investors see New Orleans like a monopoly board, with hotels the way to go.
 

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