News for the Hospitality Executive
HVS' 2011 U.S. Hotel Valuation Index (HVI) Shows Significant
January 9, 2012: Steve Rushmore, president and founder of HVS, the leading global hospitality consulting and services firm, has announced the publication of the 2011 U.S. Hotel Valuation Index. The Hotel Valuation Index (HVI) tracks hotel values in 51 major markets and the United States as a whole.
According to HVI co-authors Michael L. Mele, Chu Xu, and Rebecca Lee, “The U.S. economy is continuing its recovery from the financial crisis. Growth occurred at a relatively slow pace in the first half of 2011, but accelerated in the latter half. The factors which impeded growth in the first half of the year included: the stock market turmoil, the downgrade of the U.S. Treasuries’ credit rating, European debt crisis and uncertainty over the debt ceiling impasse. However, the outlook of the U.S. economy today has become more positive and concerns of a second recession have dwindled.”
The co-authors add that relative to the hospitality industry, investors aggressively re-entered the hotel market in 2011, and continue to do so now.
In the first half of 2011, the value of the hotel investment transactions that occurred in the U.S. market reached $7.4 billion, an increase of 180% from the same period the previous year. The U.S. continues to be the dominant country in the Americas for hotel transactions, accounting for 94% of the regional transaction volume. REITs have been trading at strong multiples and have been able to access the equity markets, while private equity funds have raised significant sums of capital and the debt markets are more active; this has led to the significant increase in activity. New York City is at the forefront of this year's deal volume.
Overall, the upward trajectory of occupancy and average rate fundamentals has lead to notable increases in hotel value. With the potential for continued improvement in underlying operating fundamentals, the sizeable amount of acquisition capital, and the desire of sellers to put their properties on the market, we anticipate this healthy recovery to continue through 2012.
According to the HVI, U.S. hotel values peaked in 2006 at $100,000 per room. The low point during the recent downturn occurred in 2009, with values dropping to $56,000 per room. By 2012-13, hotel values are expected to recover to 2006 levels and continue to increase from that point, barring any unforeseen circumstances.
“If you have the cash, now is the time to buy,” states Rushmore.
About the HVS US Hotel Valuation Index (HVI
The HVI looks at hotel supply, demand, occupancy and rate trends for each market area and creates an income and expense projection based on local operating costs. It then capitalizes the resulting net income by an appropriate capitalization rate, which produces an estimate of value for a typical hotel in that market. The HVI tracks historical hotel values back to 1987 and projects them out to 2015. This tool shows the high and low points of each cycle, the velocity of the declines and recovery, and the overall value volatility of each market. HVS is the only hotel consulting firm that provides value trends for individual markets, which compared to REVPAR data, are significantly more useful to hotel owners, operators, and lenders.
HVS is the world’s leading consulting and services organization focused on the hotel, restaurant, shared ownership, gaming, and leisure industries. Founded in 1980, the company performs more than 2,000 assignments each year for virtually every major industry participant. HVS principals are regarded as the leading professionals in their respective regions of the globe. HVS is client-driven, entrepreneurial, and dedicated to providing the best advice and services in a timely and cost-efficient manner. Through a worldwide network of more than 30 offices and 400 seasoned industry professionals around the world, HVS provides and unparalleled range of complementary services for the hospitality industry.
For a limited time, the HVS 2011 US HVI is available complimentary. To obtain a free copy of the 2011 Hotel Valuation Index, click onto http://www.hvs.com/Bookstore/
Leora Halpern Lanz