Industry Update
External Article 9 February 2010

Hotels never stabilize

By Daniel H. Lesser , President & CEO of LW Hospitality Advisors LLC (LWHA)

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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.

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Daniel H. Lesser

Daniel H. Lesser, President & CEO of LW Hospitality Advisors LLC (LWHA), brings more than 35 years of expertise in a wide range of hospitality operational, investment counseling, valuation, advisory, and transactional services. He provides services to corporate, institutional, and individual clients as well as public agencies on all facets of hospitality real estate including: litigation support and expert testimony, site evaluation, highest and best use analysis, appraisals for mortgage, acquisition, and portfolio management, workout strategies, operational analysis, development consulting, property tax assessment appeal evaluations, economic impact studies, fairness opinions, deal structuring, and negotiation of management and franchise agreements.

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