The U.S.hotel industry experienced a 22 percent increase in per-room value in 2006, according to information recently released by Hotel Valuation Services. This marks the third year in a row with at least 20 percent growth.
On average, per-room values in the United Statesrose by roundly $18,000 in 2006, and all but four of the 66 markets reviewed experienced increases in per-room value, according to the 2007 HVS U.S. Hotel Valuation Index.
"Even more telling is that the decline of capitalization and interest rates in the United States indicates continued favorable financing conditions for investors to refinance or buy lodging facilities for the next two years,” according to report authors Steve Rushmore, MAI, president and founder of HVS, Sumit Kapur and Michael J. Pajak.
The HVI tracks and discusses hotel values in 66 major U.S.markets and for the United States as a whole. Created in 1987 by HVS, a global hospitality consulting and hotel appraisal firm, the HVI is derived from an income capitalization approach, utilizing market area data provided by Smith Travel Research and historical operational and capitalization rate information from HVS’s extensive global experience in hotel feasibility studies and valuations.
The 2007 HVI also features a Volatility Index, an investment analysis tool that assists in identifying markets in which to buy or build hotels. Index developer Rushmore explains that the Volatility Index determines the standard deviation in market per-room value changes since 1987, and divides this standard deviation by the overall average per-room value of a market during the same period. “Markets with historically minimal changes in value (volatility) that are expected to record strong increases in per-room value demonstrate favorable market conditions to buy or build hotels,” Rushmore said.
To download a free PDF of the 2007 Hotel Valuation Index, click here, or contact Joan Raffetto at jraffetto@hvs.com.
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