With New Supply at a Near Standstill, Now Is the Time to Buy Hotel Assets | By Rick Swig

SPECULATING ON WHETHER TO BUY OR BUILD IS very challenging. Looking back over 2007 offers a mixed bag of predictive indicators. The first quarter brought warnings of occupancy slowdowns from astute sources like Smith Travel Research, yet acquisition activity surged and continued through the first half. There were continual questions about “What’s the right cap rate?” But establishing the “right” cap rate did not seem as important as purchasing the right strategic property. Nevertheless, there are solid reasons to buy hotel real estate even at premium prices, particularly when the asset’s makeup includes quality location, solid destination, diverse and consistent demand generators, solid brand affiliation and market barriers to entry.