Document Type

Article

Publication Date

7-2018

Abstract

Hotels in gateway cities continue to shine, rising 11.6 percent year over year compared to a 1.2-percent gain for hotels in non-gateway cities. Hotel operating performance scaled by price is still in the black based on economic value analysis (EVA), with returns continuing to exceed borrowing costs (for debt). However, the spread is narrowing, suggesting that deals will be harder to pencil going forward. Transaction volume rose both on a quarter-over-quarter and year-over-year basis. While our various pricing metrics point to continued positive price momentum for both large and small hotels, we are concerned whether rising interest rates will put a damper on this momentum. A reading of our tea leaves suggests prices will continue to increase, but do so at a decreasing rate. This is report number 27 of the index series.

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