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Hotel Investor Survey Mid Year 2009

Hotel Capitalization Rates Show Further Weakness,
But Change in Parameters Slows Somewhat

by:  Jeffrey H. Walker, MAI, CHME, 
August 26, 2009

The Mid Year 2009 USRC Hotel Investment Survey indicates that, in general, overall investment parameters for both limited-service and full-service hotels have continued to weaken. However, in a potential signal that the industry may be nearing the proverbial bottom, the rate of change for most of the parameters has slowed significantly, or even flattened, compared to the accelerated decline experienced in the Winter 2009 survey. Even with the more modest change, rates are now at their highest levels in over five years. Rates had been gradually increasing since record lows demonstrated in the 2007 surveys. In a reverse from the previous survey, there was more  movement in overall discount rates compared to going-in capitalization rates. Although short-term economics continue to be projected in negative territory, the flattening of capitalization rates compared to discount rates may indicate investors are considering the likelihood of some future recovery in their underwriting. 

ADR growth expectations continued to be negative in the current survey, as they were in the Winter Edition, which was the first time this had occurred in survey history. Many participants commented, however, that they anticipate some ADR rebounding above inflationary levels during future years’ recovery. Still, with expense growth outpacing revenue growth expectations, NOI growth will remain challenged in the short-term. 

The direct capitalization rate for limited-service hotels of 11.0% in the current survey is 30 basis points higher than the average for the previous Winter 2009 survey.

The complete Mid Year 2009 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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