Hotel Capitalization Rates on the Rise
With limited sales transactions and investment and refinancing activity, hotel capitalization rates and values are challenging to gauge in today’s marketplace. Yet, the need to know where rates of return and values lie remains an important question for hotel investors, lenders and assessors. This article updates hotel capitalization and discount data that was presented in previous articles on hotel capitalization rates (see: Allure of Hotel Investment Expected to Moderate Rise in Capitalization Rates as Rebound Takes Hold, January 2005, and Hotel Capitalization Rates Bottom Out, January 2007, by Suzanne Mellen, in the Library at www.hvs.com) and provides guidance on hotel capitalization and discount rates used in hotel valuation. Based on current trends discussed in this article, overall capitalization and discount rates have increased roundly 100 to 250 basis points (depending upon ones definition of these terms) from their recent historic lows. Sales data, investor surveys and the cost of capital are investigated in this article to support this conclusion.
With limited sales transactions and investment and refinancing activity, hotel capitalization rates and values are challenging to gauge in today’s marketplace. Yet, the need to know where rates of return and values lie remains an important question for hotel investors, lenders and assessors. This article updates hotel capitalization and discount data that was presented in previous articles on hotel capitalization rates (see: Allure of Hotel Investment Expected to Moderate Rise in Capitalization Rates as Rebound Takes Hold, January 2005, and Hotel Capitalization Rates Bottom Out, January 2007, by Suzanne Mellen, in the Library at www.hvs.com) and provides guidance on hotel capitalization and discount rates used in hotel valuation. Based on current trends discussed in this article, overall capitalization and discount rates have increased roundly 100 to 250 basis points (depending upon ones definition of these terms) from their recent historic lows. Sales data, investor surveys and the cost of capital are investigated in this article to support this conclusion.
