Hotel Online  Special Report

Hotel Investor Survey Winter 2007
Hotel Capitalization Rates Continue
Record-Breaking Decline
Results Demonstrate Most Aggressive Parameters in Survey History


 by:  Jeffrey H. Walker, MAI, CHME and Rajesh Shah, February 6, 2007

The just-released Winter 2007 USRC Hotel Investment Survey indicates that discount rates and capitalization rates for both limited-service and full-service hotels have continued to decline. After holding rather steady to slightly moderating in the Mid-Year 2006 Survey, rates have resumed their fall, and are now at the most aggressive levels we have seen in the thirteen-year history of USRC’s hotel investor survey data. 

The average direct capitalization rate for full-service hotels of 7.3% in the current survey is the lowest level seen in the history of the survey. The drop in rates demonstrate a continued confidence in the industry, and a growing sense, particularly among institutional investors, that the hotel segment offers attractive yields in relation to far more aggressive investment parameters in historically “Core” asset categories such as multifamily and net lease industrial properties. While there is certainly a consensus that the hotel segment still reflects risks beyond the more traditional asset types, there is growing confidence in the risk in relation to the spread in potential yields achievable. This is particularly true given the recent RevPAR growth in the industry, and reflected in our recent survey respondents’ expectations. Thus, some perceived risk associated with hotel assets is offset by potential rewards from above inflationary income growth as market demand and ADR continue to expand. It is interesting to note that, when asked to comment on potential threats to the industry, there was not a single respondent who mentioned terrorism as a risk factor, a threat which dominated respondents’ comments several years ago.

The complete Winter 2007 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, 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 career with Hyatt Hotels and Resorts, and has been a hotel consultant since 1992. He can be reached at 614-221-9494 (ext 150) or at




US Realty Consultants
Jeffrey H. Walker, MAI, CHME
Principal and Managing Director
492 South High Street
Suite 200
Columbus, Ohio 43215
Phone: 614-221-9494 ext 150


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