News for the Hospitality Executive
Hotel Capitalization Rates Fall Further,
By Jeffrey H. Walker, MAI, CHME
March 9, 2011
The Winter 2011 USRC Hotel Investment Survey indicates that overall investment parameters for both limited-service and full-service hotels have continued to become more aggressive. While a year ago there was discussion of a glimmer of hope, and six months ago the survey represented cautious optimism, the current Winter 2011 survey, by contrast, clearly reflects expectations that the recovery is underway and on solid footing. As yield requirements lessened, anticipated growth (reflected by ADR expectations) continued to increase, even beyond the very healthy movement we saw in the last Mid Year 2010 Survey.
As always, it is important to see the data in the context of longer-term trends. Full-service discount rates are now at their lowest level since the Mid Year 2007 survey, just prior to rates beginning to creep up in 2008, and of course the subsequent economic and credit collapse of the Fall of 2008. Remarkably, they are now just 10 basis points higher than the record low seen in the Winter of 2007 survey, and are hovering very near the survey results of the last recovery years of 2005-2006, following the post 9-11 downturn.
Full-service hotel capitalization rates continued their decline, with the direct capitalization rate for full-service hotels of 8.4% in the current survey, down 30 basis points from the average for the previous Mid Year 2010 survey.
The complete 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 firstname.lastname@example.org.
US Realty Consultants
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