Cornell Study Finds that Economic Value Added (EVA) Opens a Window into Hotel Investments

Jan 28, 2014

Contact:  Jane Henion, 607.254.8987,

Cornell Study Finds that Economic Value Added (EVA) Opens a Window into Hotel Investments

Ithaca, NY, January 28, 2014 - A study from the Cornell School of Hotel Administration demonstrates the use of economic value added (EVA) as a measurement of hotels' investment performance. The study, "Using Economic Value Added (EVA) as a Barometer of Hotel Investment Performance," by Matthew J. Clayton and Crocker H. Liu, is available at no charge from the Cornell Center for Hospitality Research (CHR). The report is issued in conjunction with the Center for Real Estate and Finance (CREF) at the School of Hotel Administration.

"EVA is a well known investment tool, and it works very effectively as a barometer of investment performance for hotels," said Clayton, who is an associate professor and Stone Family Faculty Fellow at the Cornell School of Hotel Administration. "For most hotel deals, analysts look at the cap rate spread, and that's a useful measurement, but EVA goes beyond cap rates to include investors' risk premium and the cost of equity financing."

Added Liu, who is a professor at the School of Hotel Administration: "We document the EVA spread on hotels during the real-estate boom of ten years ago and the following bust. So, right after hotels reached the peak of value in 2007, the EVA spread turned negative in the second quarter of 2008 as hotel values had already started to decline."

Clayton and Liu found that the EVA remains generally negative at the moment, a figure that coincides with continued economic and property sector weakness. They conclude that this negative EVA spread suggests that investors may be buying properties either to reposition them for stronger cash flow or to realize their profit from the deal when they sell their repositioned property.
About The Center for Hospitality Research
A unit of the Cornell School of Hotel Administration, The Center for Hospitality Research (CHR) sponsors research designed to improve practices in the hospitality industry. Under the lead of the center's corporate affiliates, experienced scholars work closely with business executives to discover new insights into strategic, managerial and operating practices. To learn more about the center and its projects, visit

Center Senior Partners: Accenture, ASAE Foundation, Carlson Rezidor Hotel Group, National Restaurant Association, SAS, STR, and Taj Hotels Resorts and Palaces

Center Partners: Davis & Gilbert LLP, Deloitte & Touche USA LLP, Denihan Hospitality Group, Duetto, Forbes Travel Guide, Four Seasons Hotels and Resorts, Fox Rothschild LLP, Hilton Worldwide, Host Hotels & Resorts, Inc., Hyatt Hotels Corporation, Intel Corporation, InterContinental Hotels Group, Jumeirah Group, Maritz, Marriott International, Inc., Marsh's Hospitality Practice, McDonald's USA,, PricewaterhouseCoopers, Proskauer, ReviewPro, Revinate, Sabre Hospitality Solutions, Sathguru Management Consultants (P) Ltd., Schneider Electric, Travelport, TripAdvisor, and Wyndham Hotel Group

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About The Center for Real Estate and Finance
Established in 2009, the Center for Real Estate and Finance provides a platform for educating students, creating new knowledge through research activities, and exchanging information about real estate with a broad set of audiences. CREF is at the forefront of research in all areas of commercial real estate, from the study of the behavior of real estate assets in investment portfolios to an understanding of real estate capital markets to the science of hedging real estate risk. To learn more about CREF, visit

CREF Industry Fellows: Atlantic & Pacific Companies • Caribbean Property Group • Carlson Hotels • Chartres Lodging Group • Crescent Heights • Grove International Partners • Hersha Hospitality Trust • Hilton Worldwide • Hudson Bay Company • HVS • IHG • Jones Lang LaSalle Hotels • LaSalle Hotel Properties • Marriott International • Prudential Real Estate Investors • PWC • Real Capital Analytics • RLJ Lodging Trust • Sawyer Realty Holdings • Spring Bay Property Company • Starwood Capital Group • Sunstone Hotel Investors • The Mega Company • W Holdings • Watermark Capital Partners, LLC • Wells Fargo • Westbrook Partners • Wyndham Hotel Group