Hotel investments looking more solid

July 15, 2010 03:45PM

Shelling out $2.9 billion for properties across the country, investors
are demonstrating confidence that the hotel sector rebounded in the
first half of the year, according to CoStar Group. The uptick in sales
is occurring after the hospitality sector, hit by dramatic declines in
revenue per available room, or revpar, saw property sale prices
decrease more than any other commercial property category. But now
revpar declines have waned and hotel prices are starting to firm up
after falling as much as 50 percent from their 2006 to 2007 peaks.
Investors seem intent on taking advantage of bottom-of-the-cycle prices
to establish a foothold in the recovering market, although most
properties are trading well below replacement costs and historical
valuations. Sellers, meanwhile, are cashing in on the dearth of quality
product on the market, improved borrowing conditions and the
willingness of buyers to accept lower initial yields. However, many of
these deals involve distressed properties. TRD