Although current capital market terms are putting downward pressure on values, the full impact of these conditions is tempered by the expectation of a return to more favorable terms in the relatively near future. The opportunity to refinance in the near-to-mid term provides an equity investor with a return of a portion of their initial investment, which supports a lower blended discount rate—and higher value—than indicated by a weighted average cost of capital based on current mortgage terms.

The ALIS Conference came and went this week, bringing Downtown L.A. hotels to life with optimism and hope that normal for the hotel industry is coming in the not-too-distant future. Here are some collective takeaways from our team that was in attendance.

Following waves of asset of appreciation, the pendulum has swung, and many hotels will be facing significant value declines in the current economic climate. As owners look for every way to reduce operating expenses, they should remain vigilant to pending fluctuations in real property assessment levels and proactive on appealing their assessments, if warranted.

The COVID-19 pandemic and the related restrictions on travel, business activity, and individual movement are having an unprecedented impact on our industry and economy. Hotel owners, operators, lenders, and investors are all facing greater challenges than ever anticipated, as they grapple with plummeting occupancy, average rate (ADR), and RevPAR and seek solutions to mitigate the impact on EBITDA.

The 41st NYU International Hospitality Industry Investment Conference wrapped up on June 4, 2019, and the overall sentiment of the event was one of caution, a shift from a sentiment of cautious optimism at conferences earlier in the year.

Each year, HVS researches and compiles development costs from our database of actual hotel construction budgets. This source now provides the basis for our illustrated total development costs per room/per product type.

Hotel stakeholders shared a diversity of insights into U.S. hotel industry trends during the lifecycle of a hotel, including development, conversion/repositioning, and disposition.

For 2017, the highest RevPAR growth is anticipated for markets such as Sacramento, Washington D.C., Tucson, Chicago, Salt Lake City, Albuquerque, Houston, and Nashville, per the ALIS presentations.

Hotel assets continued to appreciate in 2016, but at a more modest pace due to slowing RevPAR growth and a rise in cap rates. The stock market rally following the election has led to cautious optimism about what 2017 will bring.

Each year, HVS researches development costs from our database of actual hotel construction budgets, industry reports, and franchise disclosure documents. These sources provide the basis for our range of component costs per room.