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Hotel Valuation and Transaction Trends for the U.S. Lodging Industry
June 2013
Steve Rushmore, MAI, FRICS, CHA
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$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Value Per Room Replacement Cost
U.S. Hotel Valuation Crossroads
2013
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This Year the U.S. Hotel Industry is Approaching a Significant Crossroad
Hotel Value Fundamentals Signal a Strong Positive
Trend in Transaction Volume & New Hotel
Development
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Hotel Value Fundamentals Signal a Positive Trend in Transaction Volume & New Hotel Development
Hotel values now exceed their 2006 peaks:
Owners holding out to sell at a gain can now sell
Look for a significant increase in transaction volume
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Value Trend for a Typical U.S. Hotel
2004 2005 2006
Value Per Room $65,000 $82,000 $99,000
Percent Change 28% 26% 21%
2007 2008 2009
Value Per Room $95,000 $81,000 $56,000
Percent Change -4% -15% -31%
Source: HVS/STR Hotel Valuation Index
2010 2011 2012 2013
Value Per Room $65,000 $78,000 $94,000 $106,000
Percent Change 17 % 20% 20% 12%
2014 2015
$122,000 $133,000
15% 9%
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Number Number Average Price
of Hotels of Rooms Per Room
2000 138 37,443 $117,000
2001 114 28,183 $154,000
2002 102 29,331 $117,000
2003 133 34,859 $137,000
2004 184 54,619 $136,000
2005 277 80,274 $159,000
2006 260 75,773 $208,000
2007 256 63,847 $181,000
2008 129 25,240 $180,000
2009 46 10,997 $134,000
2010 138 32,055 $191,000
2011 209 53,223 $209,000
YTD 2012
184 44,047 $181,000
32 8,548 $198,000
Source: HVS
2012
Major Hotel Sales
YTD 2013 61 15,913 $189,000
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Select Major Hotel Transactions 2013
Property Name City State Rms Price Per Room
Liberty Hotel Boston MA 298 $570,000
Bacara Resort & Spa Goleta CA 360 $514,000
Embassy Suites San Diego CA 337 $333,000
Holiday Inn Express San Francisco CA 252 $240,000
Marriott Courtyard Houston TX 197 $176,000
Marriott Atlanta GA 1663 $175,000
Residence Inn Houston TX 171 $164,000
Hilton San Diego CA 349 $132,000
Source: HVS
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All Markets Will Show Value Appreciation: 2012-2016
Rank
1 Miami $238,000
2 Oahu $210,000
3 New York $145,000
4 San Francisco $139,000
5 West Palm Beach $80,000
6 Austin $68,000
7 New Orleans $65,000
8 Fort Lauderdale $62,000
9 San Diego $59,000
10 Tampa $57,000
Rank
56 Memphis $17,000
57 Washington DC $13,000
58 Wilmington, DE $10,000
59 New Haven $9,000
60 Rochester, NY
$8,000
61 Dayton $7,000
62 Norfolk $6,000
63 Albuquerque $6,000
64 Tallahassee $5,000
65 Tucson $4,000
28 United States $38,000
Source: HVS/STR Hotel Valuation Index
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Top U.S. Cities: Value Per Room
2010
New York $320,000
San Francisco $306,000
Oahu $305,000
Washington DC $255,000
Boston $254,000
Miami $226,000
Los Angeles $164,000
San Diego $148,000
Denver $133,000
Seattle $131,000
$314,000
2015
Oahu $665,000
San Francisco $606,000
Miami $583,000
New York $565,000
Boston $419,000
Los Angeles
Austin $259,000
San Diego $252,000
San Jose $247,000
Chicago $246,000
Source: HVS/STR Hotel Valuation Index
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Hotel Value Fundamentals Signal a Positive Trend in Transaction Volume & New Hotel Development
Hotel values are now higher than replacement cost:
New construction has become economically feasible
Look for an increase in new hotel development
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Luxury Segment: Cost vs. Value Such as Ritz-Carlton, Four Seasons (Updated)
Build
Buy
Luxury 2013 $-
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
1987 1991 1995 1999 2003 2007 2011 2015
Val
ue
Pe
r R
oo
m
Value Cost
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Upper Upscale Segment: Cost vs. Value Such as Westin, Hyatt
Upper Upscale 2013
$-
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$450,000
1987 1991 1995 1999 2003 2007 2011 2015
Val
ue
Pe
r R
oo
m
Value Cost
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Upscale Segment: Cost vs. Value Such as Courtyard, Hilton Garden Inn
Upscale 2012
$-
$50,000
$100,000
$150,000
$200,000
$250,000
1987 1991 1995 1999 2003 2007 2011 2015
Val
ue
Pe
r R
oo
m
Value Cost
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Economy Segment: Cost vs. Value Such as Microtel, Motel 6
Economy 2015
$-
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
1987 1991 1995 1999 2003 2007 2011 2015
Val
ue
Pe
r R
oo
m
Value Cost
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Hotel Value Fundamentals Signal a Positive Trend in Transaction Volume & New Hotel Development
Hotel mortgage interest rates are at record lows
Smart lenders are turning to new construction financing to increase their yields
An increase in interest rates will raise cap rates and lower values
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Mortgage Parameters
Interest Rate
Amortization and Leverage
Source: HVS
30 years with 65% 25 years with 70%
30 years with 70% 25 years with 75%
4.0% to 4.5%
High Quality
Middle Quality
Lower Quality
Trophy (Top 3%)
25 years with 60%-65%
25 years with 60% 20 years with 65%
4.2% to 5.2%
5.0% to 6.0%
5.5% to 6.5%
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Indicated Capitalization Rates on T12 Net Income
Capitalization Rate on T12
Source: HVS
High Quality
Middle Quality
Lower Quality
Trophy (Top 3%)
6.5%-7.5%
5.5%-6.5%
8.0%-9.0%
7.0%-8.0%
- 18 - Source: HVS/STR Hotel Valuation Index
Buy
Miami
West Palm Beach
Oahu
Tampa
Hold/Sell
Washington D.C.
Rochester
Tucson
New Haven
Where to Buy, Hold/Sell and Build
Build
Anywhere you can get construction financing
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Supply growth will accelerate over the next 5 years
Transaction volume will increase significantly in 2013 & 2014
Today is the best opportunity to buy, sell or develop hotels since 1991
Rushmore’s Observations
Source: HVS
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Thank You
