Hotel Online  Special Report

Hotel Investor Survey
Mid-Year 2008
Hotel Capitalization Rates Continue to Soften
Slowing Growth Expectations Are Taking Root


by:  Jeffrey H. Walker, MAI, CHME, August 29, 2008

The Mid-Year 2008 USRC Hotel Investment Survey indicates that capitalization rates for both limited-service and full-service hotels have continued to moderately increase, a trend which began with our last Winter 2008 survey. The survey had seen record lows demonstrated in the Mid-Year 2007 and Winter 2007 surveys. There was less movement in overall discount rates, particularly for full-service hotels, with the moderating capitalization rates continuing to be a factor of slowing growth expectations in ADR. This slowing rate growth expectation accelerated in our current survey. In commentary, participants expressed increased concern about underlying economic issues (i.e., overall softening demand, impact of reduced air travel, fuel prices, etc.) compared to concerns about overall availability of capital, which has dominated the mainstream press. 

As we have pointed out in the last few surveys, in general, large institutional investors continue to be somewhat more positive in their responses than their smaller regional counterparts. This may be due to lower reliance on leverage among institutional owners. In general, large owners appear to be predominantly taking a “wait and see” attitude to the current market uncertainty. A general “hold” mentality appears to be dominant.

Our Mid-Year 2008 survey indicates that investors continue the trend of requiring relatively higher capitalization rates for limited-service hotels as compared to full-service hotels. The direct capitalization rate for full-service hotels of 8.2% in the current survey is 30 basis points higher than the average for the Winter 2008 survey.

The complete Mid-Year 2008 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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