Opposite ends of the chain scales expected to remain most
appealing over the medium term.
Relative to U.S. hotel cap rates, the segments that yield
the most favorable returns are located at opposite ends of the spectrum – irreplaceable
luxury assets and select-service and extended-stay hotels, according to new
data from JLL.
“This striking juxtaposition is further evidenced by hotel
acquisition composition as these sectors have emerged as the most appealing and
liquid amidst ongoing disruptions in capital markets,” JLL Senior Research Analyst
Ophelia Makis told Hotel Investment Today. “It’s anticipated that this trend
will persist over the medium term.”
While the increase in interest rates post-pandemic has
outpaced the growth of U.S. hotel capitalization rates and resultantly
compressed the U.S. hotel risk premium to its lowest level in 10 years, it
nevertheless remains higher than historical levels. In fact, between 2010 and
2022, the hotel risk premium averaged 150 basis points higher than the average
risk premium between 2000 and 2009.