With the development of hotel real estate indices comes the possibility of using those indices to benchmark hotel price appreciation, but that idea may be premature, according to a new study from the Cornell Center for Real Estate and Finance (CREF) at the School of Hotel Administration.
In the report, "A Comparison of Hotel Indices with Hotel Properties and Portfolios," Cornell Professor Walter Boudry compares the price changes of a hypothetical hotel portfolio to the hotel indices developed by CoStar and Real Capital Analytics (RCA). The report, which is co-sponsored by the Cornell Center for Hospitality Research, is available from the CREF at no charge.
"The report is really about the potential uses and abuses of hotel indices," Boudry explained. "These indices tell us something about what is going on in the aggregate, but a lot of care needs to be taken if you want to think about benchmarking portfolios. The data analysis tells us that small or lumpy portfolios are very unlikely to perform anything like these indices, while large uniform portfolios are reasonably well tracked."
The CREF issues a quarterly series of reports to analyze the changes in hotel industry prices for large transactions (over $10 million), small transactions, and repeat purchases. Reports in this "Cornell Hotel Indices" series are also available at no charge from the CREF.
Established in 2009, the Center for Real Estate and Finance provides a platform for educating students, creating new knowledge through research activities, and exchanging information about real estate and finance with a broad set of audiences. CREF is at the forefront of research in all areas of commercial real estate, from the study of the behavior of real estate assets in investment portfolios to an understanding of real estate capital markets to the science of hedging real estate risk. To learn more about CREF, visit www.cref.cornell.edu.
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