The values of hotel properties operating in the United States continue to slowly rebound from lows reached in late 2008 and early 2009, although luxury hotels have realized a quicker rebound compared to low to mid-tier properties.

Values of low to mid-tier properties (defined as properties with an average daily rate of less than $125) reached a recent peak in June 2006 and remained relatively unchanged through the end of the year. As the economic recession took hold, these properties quickly lost much of their value, declining by nearly 50% by the end of 2008. Since then, owners of low to mid-tier properties have realized a consistent, albeit slow, rebound in the value of their hotel properties. By the end of 2010, these properties retained about 60% of their value relative to their values in June 2006.

Upper-tier properties (defined as properties with an average daily rate in excess of $125), were similarly impacted by the recession in 2008 and 2009. However, these properties have realized a quicker rebound in values in the past 12 months. As of the end of 2010, these properties have recovered much of their lost value, and are valued at 80% of their peak values reached a few years earlier.

Why have upper-tier properties regained much of their lost value in the past year, while low to mid-tier hotels are hovering only slightly above their recession lows reached at the end of 2008?

• Owners of low-end hotels are more likely to be overextended, resulting in a
  disproportionately high level of foreclosures at the bottom end of the market. 
  This phenomenon has resulted in depressed price levels for this class of property.
   
• Economic recessions typically have the most impact on the lower and middle-
  class populations, which tend to stay at low or moderately-priced accommodations.

This analysis is based on historic valuations of publicly-traded companies and real estate investment trusts that own and operate hotel properties with a combined 1.2 million hotel rooms. Equitas Valuation LLC publishes business appraisal toolkits that provide business owners with everything needed to perform a business appraisal of their business interests.

View details of the Equitas Business Appraisal Toolkit for Hotel Properties