Publication Date

Winter 2002

Abstract

[Excerpt] The availability of timely revenue information represents a large first step toward understanding how hotel property returns have held up under current economic pressures. Nevertheless, these data may be somewhat misleading about the severity of hotel market softness from a capital market perspective. While the share prices of franchise and management giants in the hotel industry (e.g., Marriott International) vary directly with movements on the top of hotel property income schedules, equity and debt capital suppliers have more of a steak in the bottom-line incomes and property valuations. Unfortunately, timely information about hotel NOIs and property values is far less available to the capital markets than are the revenue numbers to franchise and management interests. At a minimum, the shortage of information about hotel NOIs and values makes hotel capital more expensive than it would be if the risks could be analyzed more completely. In the extreme case, these information problems could lead to an inefficient allocation of capital to hotel property investment.

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© The Counselors of Real Estate. Reprinted with permission. All rights reserved.

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