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Report: hotel values fell 14% in 1991.

With the continuous downslide in the hotel industry, hotel values fell 14 percent in the United States in 1991 according to the latest Hotel Valuation Index (HVI).

When combined with the 5 percent drop in 1990, most hotels have lost approximately 20 percent of their asset value in the past two years.

According to Stephen Rushmore, president of Hospitality Valuation Services, and publisher of the HVI, this decline has effectively eliminated the equity component in hotel projects and has led to a net loss of 8 percent in value over the past five years.

"On a more local basis," Rushmore added, "Philadelphia hotels suffered the greatest loss in hotel value in 1991, declining 37 percent. In fact, since 1986, Philadelphia hotel values have decreased 54 percent. "

Also suffering significant declines in 1991 were Las Vegas (34 percent), Boston (31 percent), Los Angeles (28 percent), Orlando (25 percent) and New York City (23 percent).

In 1991 only six markets showed increases in hotel values, while 18 suffered defines. On the positive side, Denver, Houston and New Orleans, markets that all started the hotel industry's downward trend in the 1980's, are now leading the recovery. The most impressive gain in value was registered in Minneapolis, a 27 percent increase.

As the economic recovery continues, hotel occupancies and room rates are expected to slowly increase, especially if the supply of hotel rooms remains relatively unchanged. When this upturn becomes more pronounced, hotel earnings should escalate rapidly, bringing hotel values up with them.

As Rushmore has said several times in the past year, "Owners should hold on to their hotel properties for the next two to four years. It is a great time for hotel buyers, not so good for hotel sellers."

HVS, in association with Smith Travel Research, designed the HVI to provide hotel owners, lenders and operators with a benchmark for tracking hotel value trends in individual market areas. The 1991 HVI focuses on 24 different market areas, as well as the country as a whole.
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Title Annotation:includes results of Hotel Valuation Index
Publication:Real Estate Weekly
Date:Oct 14, 1992
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