U.S. hotel values remained relatively stable (i.e., +/- 3%) in 2016, as RevPAR growth slowed to 3.2%, net operating income increased moderately above the rate of inflation, and cap rates rose modestly. This trend reflects the market overall, and should not be interpreted as an individual asset’s change in value; factors affecting specific markets and individual assets may result in more significant value gains or declines. As of second-quarter 2017, when the HVI for this year was developed, transaction activity in the U.S. had slowed modestly from the level realized in 2016, which in turn was down 30% from 2015, the peak transaction year of the current cycle. Slowing RevPAR growth, increased operating expenses, and the impact of new supply are causing some capital to withdraw from the hotel sector at this late point in the cycle. Alternatively, opportunistic investing and capital pursuing a safe-haven in the U.S. are still drawn to the higher yields offered by hotel assets relative to less-volatile real estate investments. Debt financing is still readily available, though lenders have become increasingly stringent in their loan underwriting. Thus, as of second-quarter 2017, the outlook for hotel performance and value appreciation is uncertain.

Post-election optimism for stronger economic growth and a tax system overhaul resulted in significant stock market gains that served to benefit the hotel sector. Stronger economic growth fuels hotel demand and inflation, which in turn drives hotel revenue and net income gains. Offsetting this optimism is concern about the current administration’s immigration policies, which may be dampening visitation to the U.S. and causing a labor shortage in some markets. The ongoing investigation of the administration also casts a cloud over the ability of congress to move forward with its agenda. Taking into consideration the anticipation of modest RevPAR and net income growth over the next few years, barring any unforeseen downturn, and the anticipated rise in interest rates and investor/lender wariness as we near the end of the cycle, HVS has forecast hotel values to remain stable (e.g., increase/decrease by +/- 3.0% per year) through 2019. Hotel value trends are highly correlated with economic growth, and this forecast may change over the course of the year as the numerous factors affecting hotel performance and investment unfold.

Change In Value For Market:

Significant Value Increase: Greater than +10%
Moderate Value Increase: Between +3% and +10%
Stable Values: Between -3% and +3%
Moderate Value Decline: Between -3% and -10%
Significant Value Decline: Less than -10%

United States RevPAR Change

United States RevPAR

Year RevPAR
2006 61.78
2007 65.54
2008 64.24
2009 53.55
2010 56.44
2011 61.02
2012 65.06
2013 68.53
2014 74.20
2015 78.63
2016 81.18
2017 83.21
2018 (f) 85.28
2019 (f) 87.67

For more information, please contact:

Stephen Rushmore, Jr., MAI, FRICS
  • +1 617 868-6840 (m)
Suzanne Mellen, MAI, CRE, FRICS, ISHC
  • +1 415 268-0351 (w)
  • +1 415 896-0868 (w)
Anne Lloyd-Jones, CRE
  • +1 516 248-8828 (w)