Hotel Capitalization Rates and the Impact of Cap Ex
By Suzanne R. Mellen, Senior Managing Director at HVS
Hotel capitalization rates hold steady in current market environment, yet increasing need for capital improvements as assets age can affect values and rates of return. This article evaluates impact of cap ex on hotel cap rates and exit strategies.
continue to rise. Capitalization rates derived from sales transactions do not overtly address the impact of capital improvements upon the purchase price or return expectations of the buyer. A realistic assessment of capital improvement costs at the time of the initial investment, and upon exiting the investment in the future, can provide an educated basis for selecting appropriate going-in and exit capitalization rates and results in a more reasoned and supportable current valuation.
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