Stories that we follow as part of our hospitality consulting practice discussed increased renovations coming and current low hotel cap rates. It was bound to end sooner than later with franchisors becoming less forgiving on upgrades and brand standards now that the economy is recovering. On a positive note, if an owner is forced to sell rather than renovate, price points and capitalization rates are in their favor. Here is some of that commentary and our take on it: – In a U.S. Report published in Hotel News Now it states “With deferred maintenance costs piling up and brands clamping down on required upgrades, hotel owners will be spending more money in 2011 than past years. Trouble is, banks aren’t offering straight renovation loans, so hotel owners are left with a few options: sell, refinance—or get out the checkbook.” If you are an investor looking to buy a hotel, there is potentially a back door opportunity to acquire a property that is not on the market by contacting various owners of franchised hotels to see if they are facing the same upgrade requirements as reported in this article. – In terms of what you can expect in hotel real estate prices from a recent acquisition standpoint, cap rates remain at historical low levels. In this example in an article written by a leading hotel appraiser, a hospitality consulting services firm advising clients can expect less than 8% capitalization rates based on what projected income formula is used. Are you a hotel franchisee facing major brand upgrades to be completed in 2011? If so, how do you plan to pay for it and what is your source of financing if any at all?? Lastly, if you are planning to sell, what cap rate valuation do you expect to use from a hospitality consulting perspective that we can share with our readers???
Perry Group
Hotel & Restaurant Experts For The Hospitality Industry
