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Daniel Lesser

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  • 3 min

Cap Rates Insufficient for Hotel Valuation, Sophisticated Investors Use Discounted Cash Flow Analysis for Pricing Decisions

💸 Cap rates assess the value of income properties, calculated as the percentage of net operating income (NOI) to asset value. For instance, a $10 million property with $900,000 NOI has a 9% cap rate. Hotel transactions use various cap rates, ranging from 5.4% to 10.4%, reflecting the income variability and risk. Hotel investors prefer discounted-cash-flow (DCF) analyses over cap rates. Deals can vary; low cap rates might suggest growth potential, while high cap rates could indicate risk.
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  • 4 min

U.S. Hotel Sale Transactions Rebounded in 2021 with Total Trades Surpassing Pre-Pandemic Levels by 2025

🏨 Between 2017-2019, the U.S. hotel market saw trade volumes of 164-182 properties and dollar volumes of $13.6-18.3 billion with room sale prices from $267,000 to $363,000. In 2020, trades dropped by 52%, rooms sold by 60%, and dollar volume by 70% due to COVID-19. In 2021, trades surged to 308, rooms to 84,200, and dollar volume to $36.2 billion. From 2022-2025, trade numbers ranged from 356-481 properties with a dollar volume of $12.8-19.9 billion.
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