Hotel Capitalization Rates Reflect Improved Optimism among Investors

COLUMBUS, Ohio, Oct. 11, 2018 — US Realty Consultants, Inc. has released its Mid-Year 2018 Hotel Investor Survey, which the company has provided for over twenty-five years. The results indicate that the initial signs of weakening in hotel capitalization rates that showed in the Winter 2018 survey appear to have reversed course.

In the Mid-Year 2018 survey, overall capitalization rates averaged 8.5% for limited-service hotels, representing a decrease of 40 basis points since the Winter 2018 survey. An equal decrease in residual rates occurred within the limited-service sector, with the current average at 9.0%.

Discount rates changed modestly since the previous survey. Within the full-service sector, discount rates averaged 10.1%, which is up 10 basis points, and represents the 4th consecutive survey with an increase.

ADR growth rate expectations for both limited-service hotels and full-service hotels increased. This also represented the reversal of a decreasing trend that began in early 2016. The current growth rate is 3.0% for limited-service hotels, and 3.2% for full-service hotels.

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The complete survey, including data on capitalization rates, discount rates, ADR and expense growth expectations, marketing time, 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.”

Peter P. Hathaway, MAI is the Director of Hospitality Consulting for USRC. He is a 1991 graduate of Cornell University’s School of Hotel Administration, spending his early career Omni Hotels, before joining US Realty Consultants in 1995. He can be reached at 614-695- 4438 or at [email protected].

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 1970’s. He spent much of his early career with Hyatt Hotels and Resorts, and has been a hotel consultant since 1992. He can be reached at 614-695-4434 or at [email protected].

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