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Hotel Underwriting Tips
Hans Detlefsen | September 18, 2018
By Hans Detlefsen As the owner of a hotel appraisal and advisory company, I get the opportunity to review hundreds of hotel appraisals, feasibility studies, investment pitch books, and offering memoranda each year. One of the things I've learned over the past two decades is that a few small changes in underwriting assumptions can greatly affect how hotel deals looks to investors. If these underwriting assumptions are not carefully considered, then they can represent big pitfalls for investors, appraisers, and others involved in the underwriting process. The following is a list of 12 issues and pitfalls I encounter frequently. This is no...
Airbnb’s Market Share of U.S. Lodging Demand Increasing at a Decelerating Rate
Hans Detlefsen | April 25, 2018
By Hans Detlefsen Since 2007, when Airbnb was created, the U.S. lodging industry has experienced a rapid increase in both traditional hotel demand and lodging demand occurring in the sharing economy. Airbnb has become a dominant channel for listing available lodging units in the sharing economy.[1] In this article, Hotel Appraisers & Advisors (HA&A) estimates Airbnb's market share of U.S. lodging demand, measured by room nights booked. We also discuss historical growth rates and the recent deceleration of Airbnb's demand growth pace. HA&A collaborated with AirDNA[2] and relied on numerous other data providers, such as STR, S...
Ranking Hotel REITs 2018: Dividends, Profit Margins, and Overhead
Hans Detlefsen | April 24, 2018
By Hans Detlefsen Hotel Appraisers & Advisors (HA&A) is pleased to announce our third annual ranking of hotel real estate investment trusts (REITs). HA&A currently monitors 16 hotel REITs, discussed throughout this report. Some hotel REITs are more effective than others at generating earnings and passing profits on to investors. In this year's report, we rank each of these hotel REITs according to three metrics: (1) dividend yields; (2) profit margins; and (3) overhead expenses. Our 2018 rankings are based on year-end 2017 data from each of the 16 hotel REIT companies we monitor. Hotel REITs offer some of the highest dividen...
How Long Do Economic Cycles Last?
Hans Detlefsen | March 26, 2018
By Hans Detlefsen In June of 1857 the U.S. economy entered its 30th consecutive month of expansion. But banks were already starting to feel the impact of bad loans piling up. As the gold rush slowed, the pace of migration westward across the country also slowed. Railroad stocks began to decline. Land speculators lost big when new railroad construction projects did not materialize as they had hoped. When international newspapers reported that the British government had circumvented rules pertaining to gold reserves, U.S. depositors wondered whether something like that could happen here. Banks came under increasing pressure to meet withdr...
Ranking Hotel REITS 2017: Dividends, EBITDA & Overhead
Hans Detlefsen | September 19, 2017
Which Hotel REITs Generate the Highest EBITDA Margins and Pass Along the Most Money to Investors? By Hans Detlefsen and Matthew Glodz Hotel Appraisers & Advisors (HA&A) is pleased to announce our second annual ranking of hotel real estate investment trusts (REITs). HA&A currently monitors 16 hotel REITs, discussed throughout this report. Some hotel REITs are more effective than others at generating earnings and passing profits on to investors. In this year's report, we rank each of these hotel REITs according to three metrics: (1) dividend yields; (2) EBITDA margins; and (3) overhead expenses. Our 2017 rankings are based on...
Hotel Cap Rates Inching Up: Is It a Good Time to Sell Hotels?
Hans Detlefsen | June 7, 2017
By Hans Detlefsen Introduction For the past seven years, hotel capitalization rates (cap rates) have generally declined, according to investor surveys. The last time hotel cap rates increased for consecutive survey periods was in 2008, as the investment community realized the U.S. economy was in the early stages of a severe economic recession. From 2008 through early 2010, hotel cap rates jumped roughly 150 to 250 basis points, depending on which survey and hotel chain scale you observed. Since then, hotel cap rates have declined roughly 200 to 300 basis points, according to the same surveys. At the beginning of 2017, hotel cap rates st...
Chicago Hotels Have Pent-Up Demand for 1.6 Million Room Nights
Hans Detlefsen | March 1, 2017
By Hans Detlefsen Chicago's Sold-Out Nights Represent 1.6 Million Unaccommodated Room Nights of Hotel Demand Annually Introduction Popular tourism and business destinations, like Chicago, experience significant weekly and monthly fluctuations in lodging demand. Different leisure, corporate, and convention travel schedules combine to create patterns of peak lodging demand throughout Chicago's downtown area. June is the busiest month, typically followed by July and September. Saturday is the busiest night, typically followed by Friday and Wednesday. So, for example, during the four Saturday nights that occurred in June of 2016, the avera...
Ranking Hotel REITS: Highest EBITDA & Lowest Overhead
Hans Detlefsen | August 10, 2016
Which Hotel REITs Achieved the Highest Hotel EBITDA Margins and the Lowest Management and Overhead Expense Ratios in 2015? By Hans Detlefsen, MPP, MAI Private equity funds, family offices, and other investors have several choices when seeking to increase exposure to real estate, specifically within the hotel sector. They can buy hotels, build hotels, invest in hotel mortgages, or invest in joint ventures that own or develop hotels. Perhaps one of the easiest methods of investing in hotel real estate, however, is simply to purchase shares of Real Estate Investment Trusts (REITs) that own hotels. Some REITs are more effective than other...
