Hotel capitalization rates have bottomed out, as rates of return remain at record low levels and NOI upside has begun to subside. This article updates data that were presented in a previous article on hotel capitalization rates.
Hotel Valuation & Transaction Trends For the US Lodging Industry.
Steve Rushmore 2006 NYU Presentation
The signs in late 2004 that investor confidence in the hotel sector was high proved correct, with 2005 witnessing an upturn in trading and a colossal amount of investment capital across the majority of European markets.
The European Hotel Valuation Index (HVI) shows that hotel values (expressed in euro) achieved a second consecutive year of growth. On average, values across Europe increased by 5% in 2005, compared with an increase of 3% in 2004.
Low Cap Rates Drive Gains in Hotel Values
2005 Canadian Hotel Transaction Survey
Reduced interest rates and lower equity yield requirements have had a substantial positive impact on hotel values. Additional value gains are now being fueled by more aggressive deal underwriting, as discussed in this article.
For the last two years, the Sensex has been driven by good monsoons, the metal commodity cycle and foreign investments. Hotel stocks and real estate not only offer an opportunity to ride the Sensex euphoria in India but also to hedge portfolio risk.
Low Interest Rates and High Demand for Hotel Assets Fuels Value Gains