Hotel Capitalization Rates Tick Up 

COLUMBUS, Ohio, March 29, 2018 -- US Realty Consultants, Inc. has released its Winter 2018 Hotel Investor Survey, which the company has provided for over twenty-five years.

The results of our Winter 2018 Hotel Investor Survey demonstrate some of the first signs of modest weakening in hotel capitalization rates, although overall yield expectations continue to show strong investor interest, particularly in the full-service sector. Discount rates were largely flat since the last survey (Mid-Year 2017) for full-service hotels, increasing a small 10 basis points, but limited-service hotels increased by 50 basis points. However, full-service and limited-service hotel capitalization rates increased by 30 basis points and 40 basis points, respectively.

ADR growth expectations continue to be below stabilized long-term levels, and are now down significantly from two years ago. For both full-service and limited-service hotels, overall ADR growth expectations are now slightly below the generally accepted 3.0% “stabilized” rate, consistent with the last survey, which was the first time anticipated growth had fallen below this threshold since the economic turmoil of 2008/2009. Expense growth expectations are now essentially equal to the longer-term 3% stabilized levels. Together, these assumptions contribute to wider anticipation of slower NOI growth for the sector.

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”.

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 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 [email protected].