BOULDER, Colorado—While most hotel investment parameters remained stable, investors and lenders indicated job growth and the ability to increase room rates as the major risks for the near-term future, according to the most recent Hotel Investors Gauge, a quarterly survey from STR Analytics and HotelNewsNow.com.
“While there is still underlying optimism for the hotel investment sector due to continued demand growth and minimal new supply, an overwhelming 62 percent of respondents indicated job growth is the biggest macro-level risk factor in the economy that could impact the industry in the near future,” said Steve Hennis, director at STR Analytics. “Not surprisingly, 43 percent of those surveyed said the most significant issue within the hotel industry is the power to increase room rates at a quicker pace over the next couple of years.”
Key findings from the Hotel Investors Gauge include:
- The median cap rate on trailing 12-month net income for stable assets was 8.5 percent, a notable increase over the 7.9 percent cap rate indicated by the Q1 Hotel Investors Gauge. However, coupled with rising cash flows, asset values remain strong.
- Investors’ return expectations and lenders’ loan terms remained relatively stable since the Q1 survey. Expected leveraged returns for investors averaged 18.5 percent. Loan-to-value ratios averaged 65.0 percent and the average LIBOR spread was 350 basis points.
- Developers’ return expectations averaged 20.2 percent.
The Hotel Investors Gauge includes a broad spectrum of hotel investors and lenders. The survey is conducted on a quarterly basis by STR Analytics and HotelNewsNow.com.
For full survey analysis and results, please visit www.HotelInvestmentBarometer.com. The Hotel Investment Barometer provides subscribers with the latest hotel real-estate transaction news, the status of two dozen metrics that real-estate pros need to know, and includes lists of the latest transactions, hotel openings, foreclosures, signed management contracts and more. The Hotel Investment Barometer is a paid subscription newsletter that is delivered on the second and fourth Tuesday of each month.
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