Hotels never stabilize | By Daniel H. Lesser | hotelnewsnow.com

All types of real estate investments, including hotel facilities, have life cycles that reflect a rise and fall of net operating income during a property’s economic life. A renovated, repositioned or brand new hotel experiences rising occupancy and/or average room rate levels during the first two to five years of operation/ownership. Hotel investors project income and expenses for the first several years of an assumed holding period up to and including a “stabilized” level of business. Beyond the initial years of a hotel’s operation/ownership, a forecast of a “stabilized” level of hotel net income is estimated as a representation of an average annual level of anticipated profit over the remaining economic life of an asset.