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Better market--better assets.

Consistent with the improved operating environment for U.S. hotels, we are beginning to see a trend towards the transaction of higher quality hotel assets. During the fourth quarter of 2003, investors coveted notable hotels such as the Hotel del Coronado resort in San Diego and the Hyatt Regency Maui. Conidence in the future of the lodging industry is a major reason why these expensive hotel assets are deemed worthy of investment.

While large resort properties make up a very small component of all hotel sales in 2003, there is a noticeable trend towards better quality assets being bought and sold. Comparing the profile of hotels that changed ownership during the first three quarters of 2003 to the first three quarters of 2002, we find an increase percentage of hotels that are larger, younger, and branded with a national chain.

This trend is distinctly different from the profile of hotels bought and sold during the deepest years of the current industry recession. Compared to previous industry recessions, higher quality assets retained their value this time around. Very few bargains existed for investors looking to pick up high quality hotels well below replacement cost. Therefore, the typical hotels sold during 2001 and 2002 were smaller, older limited-service properties that were either independent, or affiliated with a weak national chain.

The data presented in the Hotel Real Estate Sales table below is intended to simply profile the transactions that have occurred during the first three quarters of 2003 and 2002. It is not intended to measure changes in hotel values. However, the trend towards larger, younger, chain-affiliated properties has resulted in a median sales price per room for the 2003 sample that is 12.5 percent greater than the 2002 sample.

Given the optimism and positive outlook towards the future of the U.S. lodging industry, we expect to see a continuation of the increased transaction activity that has occurred in the fourth quarter of 2003. This should result in a growth in hotel property values in 2004.
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Publication:Quarterly Trends in the Hotel Industry (USA)
Geographic Code:1USA
Date:Dec 1, 2003
Previous Article:Turnaround now--recovery, when?
Next Article:Trends in the hotel industry United States cities--first nine months results for 2003.

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