By Stephen Rushmore, Jr.
HVS, the world’s leading hospitality consulting and valuation firm, in collaboration with STR, is pleased to deliver the Hotel Valuation Index (HVI). The HVI offers critical information on 38 U.S. hotel markets and the nation, including:
- Historical and projected valuation and RevPAR changes
- Intelligence on market dynamics for primary, secondary, and tertiary hotel markets
So how can the HVI be of use to an individual investor? Although the HVI cannot tell you what a particular hotel is worth, it does provide excellent “big picture” data, indicating which market areas are experiencing positive trends, and thus may present good investment opportunities. The HVI for the U.S. is a measure of the strength of the lodging industry as a whole and, specifically, the hospitality investment market.
The Fine Print
Each year, more than 80 HVS hotel experts conduct thousands of market studies, feasibility studies, and appraisal assignments for all types of hotels across the U.S. The intelligence gathered from these engagements, combined with analysis of data on hotel performance from HVS and STR, supports the conclusions and projections presented in the annual HVI. The historical and forecasted value changes are grouped into the following ranges:
The sample for each market area includes virtually all the hotels in the defined market, ranging from economy to luxury properties; limited-service to full-service operations; assets in poor to excellent condition; and a wide array of locations, from tier-one urban settings to peripheral locations in tertiary submarkets. The resulting data, while an excellent measure of the overall trends in the market as a whole, cannot be applied to any individual submarket or asset group, much less any one hotel. For example, the addition of new supply, or a change in the performance of an individual submarket within the broader market, can cause that submarket to have significantly different results than the market as a whole.
Numerous factors influence the value of an individual asset, including the property’s age, condition, location, amenities and services, brand, management expertise, and reputation. These factors must all be considered in the context of the hotel’s specific competitive market, including the nature, strength, and trends in demand generators; the character and competitive posture of the existing hotels; and the potential addition of any new properties. The value of any individual asset can only be concluded after a thorough investigation of all these factors, and that conclusion will invariably differ—often materially—from the index indicated by the HVI.
