Cornell Report: Converging Towards Normalcy

Hotel prices continue to converge toward pre-pandemic levels. Gains posted were smaller relative to the previous quarter but higher year over year. Hotels in both gateway and non-gateway cities continue to exhibit positive performance, with hotels in non-gateway cities posting greater gains. Transaction volume continued strong for large and small hotels quarter over quarter and year over year, although the increase in volume was smaller in this instance than was the increase in the prior period. Our moving average trendlines indicate that large hotels are priced to buy, while small hotels are priced at market (priced fairly). Large hotels declined from their statistical high set last quarter, based on our standardized unexpected price (SUP) performance metric.

In terms of financing hotels, mortgage financing volume continued to rise, as the cost of financing hotels slightly diminished this quarter. Among factors that have contributed to this situation are the relative risk premium, which has remained stationary this quarter, and a continued decline in the hotel delinquency rate. Hotel deals continue to look profitable, based on our economic value added (EVA) and shareholder value added (SVA) metrics. Looking toward the next quarter, our leading indicators of hotel price performance indicate that we should expect slower or declining price momentum for larger hotels but positive price gains for smaller hotels.

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