According STR Analytics' latest Q4 Hotel Investors Gauge Survey continued economic uncertainty, the fiscal cliff debacle and an emotional presidential campaign season have left hotel investors unfazed.
Most underwriting parameters for buyers and developers were relatively unchanged based on participants' responses.
STR Analytics questioned investors regarding their 2013 outlook for occupancy and average room rates. For occupancy, 40 percent of investors expect occupancy to continue to grow, while 53 percent believe occupancy is already near its peak level. Investors' outlook for room rates is far more defined.
"The biggest question regarding the pace of recovery for the overall industry has been the ability to gain momentum in growing room rates," said Steve Hennis, director at STR Analytics. "However, based on the Hotel Investors Gauge, 80 percent of respondents believe that rate growth in 2013 will continue at its current pace between 3 percent and 5 percent. Despite record demand levels and minimal supply growth, we do not yet appear to be at a point where rate growth will escalate."
Key findings from the Hotel Investors Gauge include:
The median capitalization rate on trailing 12-month net income for stable assets remained relatively flat since the Q2 Hotel Investors Gauge at 8.6 percent.
Investors' return expectations also remained stable since the Q2 survey. Expected leveraged returns for investors averaged 18.6 percent.
Developers' return expectations rose slightly to 22.2 percent, perhaps indicating a higher perceived risk in future years as supply growth is expected to increase.