Key Takeaways

A hotel held for seven years or more that generates excess returns relative to the NCREIF hotel index makes a good long-term investment.

The assertion that long-term investment in hotels catering to leisure travelers will offer excess returns is supported by continuation of substitution and income effects in the labor market.

The innate desire to travel will likely more than ever be satisfied by leisure trips and hybrid business/leisure trips brought on by virtual work and enhanced telecommunication technology.

Hotels in leisure destinations will likely generate the greatest long-term excess returns assuming an asset price bubble does not form in these properties.

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Capital expenditure (Capex) deferments, impending property improvement plans (PIPs), higher interest rates, and budget constraints make the diligent allocation of capital more important than ever.

There are six key areas capital commitment committees look for when evaluating a hotel Capex plan for approval; brand, operational impact, food & beverage opportunities, property condition, budget and financing. The article below discusses six corresponding considerations to address when evaluating plans.

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