CREF Analysis Finds Strength in Hotel Transactions

Hotel owners may finally see profits from operations, as well as from property appreciation, according to the analysis found in the Cornell Hotel Indices for the first quarter of 2015. The detailed analysis, “March Madness: Hotels Remain Hot,” is written by Crocker Liu, Adam D. Nowak, and Robert M. White, Jr. Hotel prices and transactions reflect the gradual improvement in the U.S. economy, as prices for small properties are rising, even as the direction of prices for large hotels is not so clear. Cost of debt remains stable, while the cost of equity financing has declined for this quarter. While consumer confidence continued to increase, indicating a stronger hotel market, business confidence declined noticeably (measured by the National Association of Purchasing Managers index). Thus, the signals are mixed for prices of large hotels, but small hotel prices should continue to strengthen. Liu is the Robert A. Beck professor of Hospitality Financial Management, while Nowak is on the faculty of West Virginia University and White is the founder and president of Real Capital Analytics.