Hotel Capitalization Rates Stabilize as Market Forces Create State of Equilibrium
By Suzanne R. Mellen, Senior Managing Director at HVS
Hotel capitalization rates are stabilizing due to the counter balancing forces of a healthy transaction market, a shortage of product for sale, the low cost of capital and the slowing of net income gains. This article discusses these forces and presents data illustrating these trends. Counter balancing forces at work in the hotel investment market have created a state of equilibrium that has stabilized capitalization rates for the near term. The availability of low cost capital, healthy but not frenzied transaction activity, generally strong and slowly improving hotel operating performance, offset by limited inventory and political and economic uncertainty have resulted in the most stable market environment in recent times. This article, which is published biennially, discusses trends in hotel capitalization rates and provides an outlook for 2013.
HVS, the world"s leading consulting and services organization focused on the hotel, mixed-use, shared ownership, gaming, and leisure industries, celebrated its 35th anniversary in 2015. Established in 1980, the company performs 4,500+ assignments each year for hotel and real estate owners, operators, and developers worldwide. HVS principals are regarded as the leading experts in their respective regions of the globe. Through a network of more than 35 offices and more than 500 professionals, HVS provides an unparalleled range of complementary services for the hospitality industry. HVS.com