The Hotel Valuation Index (HVI) tracks hotel values in 65 major markets and the United States as a whole.
The 2009 publication of the HVI marks an unprecedented time for hotel values. As markets fluctuated wildly throughout the past year and major banking institutions folded, hotel demand dropped dramatically, and average rates soon followed suit. The trend has continued into the summer, rendering prior forecasts for a 'quick recovery' defunct. To understand the 2009 HVI values and corresponding forecasts for each market, it is important to understand the context in which the values have been derived.
The Hotel Valuation Index (HVI) tracks hotel values in 65 major markets and the United States as a whole. Created in 1987 by HVS, the HVI is derived from an income capitalization approach, utilizing market area data provided by Smith Travel Research (STR) and historical operational information from HVS's extensive global experience in hotel feasibility studies and valuations. The HVI for 2009 is based on 2008 data; we note that each market has been evaluated and forecast based on prevailing and anticipated trends specific to that market.
The dizzying pace of declining hotel values has left industry participants in limbo. When will it end? When will it recover, and by how much? How do we even value hotels in today's uncertain times? Are the good times of recent years past gone for good?
The following discussions help to provide the context for per-room values forecast in the report. We first revisit the fateful consequences of the crumbling banking system upon the U.S. economy, and government attempts to plug the leak. We then analyze the impact of the recession upon lodging demand and compare these trends to prior periods of recession. Next, we look at how to value hotels in today's credit-dry environment. We then present the 2009 HVI, with historical values, forecasts, and discussions on notable markets. We also provide a guide to interpreting the HVI.
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