Hotels recorded total returns of 20.8% for the year ended June 2006 with income and capital returns registering 8.7% and 11.4% respectively according to NCREIF. Current hotel returns are the highest returns recorded since the third quarter of 1998.    
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�Income returns, on the other hand, are likely to average about 8.5% for the remainder of the decade which compares with their long term average of 9% since 1981.�  �We believe there is about a 70% chance of achieving income returns of between 7.6% and 9.3% over the next three to four years,� said Mr. Woods.

The forecasts are based on an econometric forecasting model of hotel returns recently developed by Hotel Investment Strategies. The model is used to explore the trajectory of hotel prices and trends in future income and appreciation returns in a way that reflects the underlying economic assumptions that impact the returns over a complete hotel market cycle. 

�The current hiatus in returns is unlikely to last as long as the previous record period of double digit returns in the late 1990s,� said Mr. Woods.  Investors enjoyed double digit total returns for about 21 consecutive quarters from the third quarter 1995 through to the third quarter 2000.  �We expect the current run to last about fourteen quarters ending in mid 2008�, said Mr. Woods.  During the last upcycle between 1995 and 1999, total hotel returns peaked in 1997 at just over 30%. 

�With cap rates likely to increase by about 96 basis points over the next two years and net operating income moderating, the growth in capital appreciation is expected to decline but remain positive until late 2009,� said Mr. Woods.   

�While many institutional investors have traditionally viewed hotels as high-risk opportunistic investments, we believe they are excellent alternative high yield investments with attractive diversification benefits�, said Mr. Woods.  �Many institutions that have shied away from the sector over the years are making a bee-line for the sector now.�

About Hotel Investment Strategies, LLC
Hotel Investment Strategies, LLC is a lodging investment advisory firm that helps clients construct and manage hotel portfolios that provide the highest levels of return for any given level of risk. The firm is headed by Ross Woods who has over 25 years consulting, asset management and portfolio management experience in the U.S. and Southeast Asia with such firms as PricewaterhouseCoopers, Prudential Real Estate Investors and Horwath Asia Pacific.  He is an industry leader in the development and implementation of hotel portfolio strategies and provides support for hotel owners and investors faced with making complex asset and portfolio decisions. 

Ross Woods at:
Tel: 212-308-2192
[email protected]