Hotel capitalization rates are stabilizing due to the counter balancing forces of a healthy transaction market, a shortage of product for sale, the low cost of capital and the slowing of net income gains. This article discusses these forces and presents data illustrating these trends.
Counter balancing forces at work in the hotel investment market have created a state of equilibrium that has stabilized capitalization rates for the near term. The availability of low cost capital,
healthy but not frenzied transaction activity, generally strong and slowly improving hotel operating performance, offset by limited inventory and political and economic uncertainty have resulted in the most stable market environment in recent times. This article, which is published biennially, discusses trends in hotel capitalization rates and provides an outlook for 2013.