|
by: Jeffrey H. Walker, MAI, CHME, March 5, 2010
Although the stabilization is a positive sign, it is important to see the data in the context of longer-term trends. Discount rates are still at their highest levels in over five years, and the modest improvement in full-service going-in rates still places them near their historical highs. Rates had been gradually increasing since record lows demonstrated in the 2007 surveys. Although full-service hotel capitalization rates declined slightly, the direct capitalization rate for limited-service hotels of 11.0% in the current survey is flat to the average for the previous Mid Year 2009 survey. The complete Winter 2010 survey, including data on capitalization rates, discount rates, income and expense growth expectations, marketing time, debt parameters, and other data for both full-service and limited-service hotels, can be ordered through the company’s website at www.usrc.com, and clicking “Publications.” Jeffrey H. Walker, MAI, CHME is Principal and Managing Director of US Realty Consultants. He is a 1985 graduate of James Madison University and has been involved in the hotel and restaurant industries since the 1970’s. He spent much of his early career with Hyatt Hotels and Resorts, and has been a hotel consultant since 1992. He is involved with hundreds of hotel analyses annually for national lenders and major institutional clients, and is a frequent speaker at national conventions. He can be reached at 614-221-9494 (ext 150) or at jwalker@usrc.com. |
The
Winter 2010 USRC Hotel Investment Survey indicates that, in general, overall
investment parameters for both limited-service and full-service hotels
have generally flattened, a signal that the industry may have, at least
for now, hit the proverbial bottom. More specifically, full-service going-in
overall capitalization rates modestly improved since Mid Year 2009, while
discount rates remained essentially unchanged. Importantly, overall ADR
growth expectations improved. This combination of factors leads to a summary
conclusion of similar overall yield requirements, but with stronger growth
expectation from current “trough” levels, resulting in steady to modestly
lower overall going-in rates.