July 2003 - Results from the 2003 edition of the Hospitality Investment
Survey, recently completed by PKF Consulting and the Hospitality Research
Group, provide direct evidence that investors and lenders are not close
to turning bullish about hotel real estate.
| �In fact, the combination of lack-luster
performance of the economy, Iraqi war, and SARS produced a setback in hotel
investor confidence,� according to Scott Smith, MAI,vice president in the
Atlanta office of PKF Consulting. Hotel lenders relaxed underwriting
standards slightly since the previous PKF survey in 2002.The average debt
coverage ratio slipped from 1.52 to 1.47 and the loan-to-value ratio moved
upward from 62.17%to 65.25% between 2002 and 2003.
�Although this trend provides a positive signal for hotel real estate
lending, both measures remain in restrictive territory when compared |
Now Available
2003 Hospitality Investment
Survey
Hotel transaction criteria from recent buyers, sellers, lenders
Cost $125
The Hospitality Research Group
Toll-Free 888-999-9714, Ext 237
www.hrgonline.com
|
|
to historical evidence from the survey,� remarks Jack Corgel, Ph.D., Managing
Director of the Hospitality Research Group.
Equity return requirements of investors also declined slightly, but
continue to be quite high (i.e.,equity yields of approximately 20%) relative
to the current low level of interest rates. Despite these apparent improvements
in hotel lending and equity investment criteria, the average capitalization
rate moved up in the 2003 survey to 11.24% from 10.94%in 2002 suggesting
that hotel values are not on the rise.
�Yet,� as Smith points out, �owners have held on to high quality assets
during this period of economic and political instability because the cash-on-cash
returns well exceed those for other investments. Consequently, a sizeable
proportion of the properties sold in this market are of lower quality.
The few higher quality hotels that traded recently sold at capitalization
rates well below the average.� Historically, the lending and investment
criteria from the PKF survey have shown how much more risky the limited-service
segment is relative to full-service hotels.
�In this year�s survey, these differences all but disappeared and to
some degree reversed them-selves. At the current low levels of supply growth
across all segments of the industry, the construction risk of limited service
lending and investment is not as great as it has been for the past decade,�
says Corgel.
Northern California Trends
Northern California Market Mix
May 2003
| . |
San Francisco
|
Not Including
San Francisco
|
Overall
|
| Group |
31.3% |
28.2% |
25.4% |
| Leisure |
37.8% |
34.0% |
30.3% |
| Commercial |
21.6% |
28.5% |
34.9% |
| Other |
9.2% |
9.4% |
9.4% |
.
Northern California Monthly Trends
Month of May, 2003
Report of Rooms Business by Location
|
.
|
AVERAGE DAILY ROOM RATE
2003
|
AVERAGE DAILY ROOM RATE
2002
|
AVERAGE DAILY ROOM RATE
Var
|
OCCUPANCY PERCENT
2003
|
OCCUPANCY PERCENT
2002
|
OCCUPANCY PERCENT
Var
|
| SAN FRANCISCO |
$147.53 |
$152.38 |
-3.2% |
68.1% |
65.7% |
3.6% |
| SANFRANCISCO AIRPORT |
85.18 |
98.41 |
-13.4% |
52.5% |
58.0% |
-9.5% |
| SAN JOSE/PENINSULA |
104.16 |
130.07 |
-19.9% |
51.7% |
59.1% |
-12.6% |
| OAKLAND/EASTBAY |
97.15 |
116.01 |
-16.3% |
55.4% |
58.2% |
-4.7% |
| MONTEREY/CARMEL |
200.95 |
220.99 |
-9.1% |
68.2% |
68.6% |
-0.5% |
| CENTRAL VALLEY |
66.63 |
77.92 |
-14.5% |
72.7% |
69.5% |
4.6% |
| SACRAMENTO |
86.18 |
96.83 |
-11.0% |
75.1% |
76.8% |
-2.3% |
| MARIN COUNTY |
125.45 |
131.56 |
-4.6% |
68.3% |
68.3% |
0.0% |
| NAPA/SONOMA COUNTIES |
147.73 |
170.84 |
-13.5% |
67.9% |
70.1% |
-3.1% |
| OTHER NORTHERN CALIFORNIA |
75.58 |
92.48 |
-18.3% |
63.3% |
59.8% |
5.8% |
| OVERALL AVERAGE |
$114.93 |
$131.45 |
-12.6% |
62.7% |
64.0% |
-1.9% |
,
Northern California Monthly Trends
Five Months Ending May, 2003
Report of Rooms Business by Location
| |
AVERAGE DAILY ROOM RATE
2003
|
AVERAGE DAILY ROOM RATE
2002
|
AVERAGE DAILY ROOM RATE
Var
|
OCCUPANCY PERCENT
2003
|
OCCUPANCY PERCENT
2002
|
OCCUPANCY PERCENT
Var
|
| SAN FRANCISCO |
$140..85 |
$149.13 |
-5.6% |
61.2% |
59.6% |
2.7% |
| SANFRANCISCO AIRPORT |
90.25 |
101.93 |
-11.5% |
51.1% |
57.6% |
-11.3% |
| SANJOSE/PENINSULA |
111.37 |
131.38 |
-15.2% |
54.5% |
60.5% |
-9.8% |
| OAKLAND/EAST BAY |
96.29 |
107.20 |
-10.2% |
54.2% |
58.3% |
-7.2% |
| MONTEREY/CARMEL |
183.09 |
189.95 |
-3.6% |
62.1% |
64.7% |
-4.1% |
| CENTRAL VALLEY |
64.05 |
66.50 |
-3.7% |
68.8% |
66.3% |
3.8% |
| SACRAMENTO |
86.58 |
90.26 |
-4.1% |
69.9% |
72.3% |
-3.4% |
| MARIN COUNTY |
121.63 |
125.94 |
-3.4% |
56.4% |
60.4% |
-6.7% |
| NAPA/SONOMA COUNTIES |
123.34 |
130.57 |
-5.5% |
56.9% |
58.8% |
-3.3% |
| OTHER NORTHERN CALIFORNIA |
75.74 |
80.85 |
-6.3% |
61.2% |
63.5% |
-3.7% |
| OVER ALL AVERAGE |
$111.59 |
$122.45 |
-8.9% |
59.4% |
61.4% |
-3.3% |
TRENDS is compiled and produced by PKF Consulting. Readers are advised
that
PKF Consulting does not represent the data contained herein to be definitive.
Neither
should the contents of this publication be construed as a recommendation
of policies
or actions. Quotation and reproduction of this material are permitted
with credit to
PKF Consulting,a wholly-owned subsidiary of Hospitality Asset Advisors
International.
|
