US Hotel values continue robust recovery

The hotel recovery continues for all the major U.S. hotel markets with the average hotel increasing approximately $13,000 per room, or about 20 percent during 2011.

These finding were developed by the HVS/STR Hotel Valuation Index, a valuation benchmark showing trends in U.S. hotel values from 1987 to 2015. The HVI is based on supply and demand data from STR for 22 major U.S. hotel markets coupled with profit and loss projections and cap rates developed by HVS. The result is a set of yearly values of a typical hotel in each of these markets and the U.S. as a whole.

During 2011, Miami leads the list with the value of a typical hotel increasing approximately $83,000 per room, followed by San Francisco at $81,000 per room. On a percentage basis the average hotel in Las Vegas gained 125 percent, showing not only the strong recovery taking place in that city, but also the highly depressed hotel values in 2010 (less than $30,000 per room). While hotel values increased in all the major cities during 2011, values in Atlanta gained only 1 percent.

The average hotel in New York City is expected to increase in value almost $280,000 per room between 2011 and 2015. Values in Oahu (Hawaii) are projected to rise approximately $196,000 per room. Of the major U.S. hotel markets, the lowest per room value gains are Washington, DC, where an average hotel is expected to have an $8,000 per room value increase, followed by Atlanta where values are projected to go up $32,000.

The HVS/STR Hotel Valuation Index is a useful tool for investors looking to either purchase a hotel or to time a sale. For example, if a hotel investor is looking to purchase a hotel, the markets with the greatest upside on a dollar per room basis are New York, Oahu, Miami and Chicago. On a percentage basis the top markets would be Las Vegas, New Orleans, Orlando and Chicago.

Investors looking to time a sale of one of their hotels should probably hold off selling in those markets showing the greatest upside from 2011 to 2015, but may want to sell sooner in those markets which are displaying limited upside such as Washington DC, Atlanta, Denver, Dallas and San Francisco.