Hotel Capitalization Rates Improve Modestly, According to USRC Hotel Investor Survey

COLUMBUS, OH--(Marketwired - Sep 6, 2013) - US Realty Consultants, Inc. has released its Mid-Year 2013 Hotel Investor Survey, which the company has provided for over twenty years. Much has changed since the release of our Winter 2013 Survey in February. We have seen the latest fiscal cliff, the resulting Federal sequester, and sharply rising interest rates which spiked late in the Second Quarter. So perhaps the biggest irony of the Mid-Year 2013 Hotel Investor Survey is just how little has changed in some of the underwriting investment parameters. The overall news in the Mid-Year 2013 USRC Hotel Investment Survey remains positive, and remarkably consistent with recent surveys. Overall discount rates (yield) have now been essentially flat for nearly ten quarters, and still remain quite strong by historical standards. With the current survey, overall going-in capitalization rates fell further, as expectations for revenue growth continue to exceed expense growth expectations.

More specifically, in the current survey, full-service capitalization rates dropped by 50 basis points, while limited-service going in rates dropped by 30 basis points. As yield requirements remain low, anticipated revenue growth (reflected by ADR expectations) continues to exceed expense growth estimates, indicating continued expectations of NOI recovery, which leads to "forced down" going in rates relative to yields.

The complete survey, including data on capitalization rates, discount rates, ADR and expense growth expectations, marketing time, debt parameters, and other data for both full-service and limited-service hotels, can be ordered through the company's website at www.usrc.com, and clicking "Publications."

Jeffrey H. Walker, MAI, CRE is Principal and Managing Director of US Realty Consultants. He is a 1985 graduate of James Madison University and has been involved in the hotel and restaurant industries since the 1970s. He spent much of his early career with Hyatt Hotels and Resorts, and has been a hotel consultant since 1992. He is involved with hundreds of hotel analyses annually for national lenders and major institutional clients, and is a frequent speaker at national conventions. He can be reached at 614-221-9494 (ext 150) or at jwalker@usrc.com.