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Hotel Investor Survey Mid Year 2007
Hotel Capitalization Rates Hold for Now
But Capital Market Concerns Emerge


by:  Jeffrey H. Walker, MAI, CHME

August 24, 2007 - The Mid-Year 2007 USRC Hotel Investment Survey indicates that discount rates and capitalization rates for both limited-service and full-service hotels have generally held at or near the record lows demonstrated in the Winter 2007 survey. However, it does not appear that the generally declining trend since 2002 is continuing, or that rates are become more aggressive, as capitalization rates have generally flattened. In commentary, participants expressed some concern regarding increasing risks to investment parameters from recent volatility in the capital markets. 

Respondents expressed concern regarding the potential for increased interest costs to ultimately increase capitalization rates, particularly for properties which typically appeal to leveraged buyers. Although many respondents expressed speculation that this may occur, the general consensus is that, as of the date of this survey, there is not yet evidence that increased capital costs and more restrictive lending parameters among CMBS lenders has yet translated into increased capitalization rates for hotels. Although spreads over treasuries have clearly increased among CMBS lenders, this has partially been offset by recent reductions in the treasuries. Volatility in the treasury rates certainly make the ultimate cost of capital difficult to project in the near term.

The current full-service average capitalization rate in the survey is 7.6%, a modest 30 basis point increase from six months ago. The capitalization and yield rates, still quite low by historical standards, demonstrate a continued confidence in the industry. 

The complete Mid-Year 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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