Center for Hospitality Research Indices

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Hotel Sustainability Benchmarking Index 2024
Ricaurte, Eric; Jagarajan, Rehmaashini (2024-05-07)
For the first time in the ten annual cycles of the Cornell Hotel Sustainability Benchmarking cycle, we find a general increase from 2021 to 2022 in energy and water consumption among participating hotels. This increase is largely associated with the global recovery from the anomaly of 2021, where occupancy levels were lower than usual and most hotels were not operational for the full year due to the pandemic. The increase in hotel occupancy rates between 2021 and 2022 and recovery to pre-pandemic operating levels contributed to the increase in energy consumption levels in 2022. Comparison between 2019 and 2022 consumption levels show a general decrease in energy and water consumption per square meter, but an increase in energy and water consumption per occupied room. This observation is largely attributed to the lag time between the resumption of hotel operations and the return of travelers.
Large Hotels Reach a New Statistical Low
Liu, Crocker H.; Nowak, Adam D.; White, Robert M. Jr. (2024-04-12)
Only the Midwest, South Atlantic, and West South-Central regions posted moderate single-digit hotel-price gains in the first quarter 2024 (Midwest, 3.2%; South Atlantic, 3.8%; and West South-Central, 1.6%). Hotels in gateway cities experienced a reversal, exhibiting better performance than hotels in non-gateway cities this quarter. Transaction volume fell year over year and quarter over quarter for both large and small hotels in gateway and non-gateway cities. Standardized prices of large hotels continue to soften while those of smaller hotels remain relatively stationary. The cost of hotel debt financing and the delinquency rate for hotels rose in the recent quarter, even though credit spreads continued to tighten and relative risk narrowed. As in prior periods, borrowing costs still exceed the return on hotels. Expect to see a rise in the price of large hotels and a decline in prices for small hotels next quarter based on our leading indicators of hotel price performance.
Hotel Prices Continue to Lose Momentum
Liu, Crocker H.; Nowak, Adam D.; White, Robert M. Jr. (2023-08-07)
The price performance of hotels continues to lose momentum, with all regions posting lower year-over-year and quarter-over-quarter performance relative to the previous period. While performance was weaker for hotels in both gateway and non-gateway cities, hotels in the non-gateway cities fared better than those in the gateway cities. While transaction volume declined on a year-over-year basis, transaction volume was up quarterly for small hotels and hotels in non-gateway cities. Based on moving averages, a sell signal is indicated for large hotels, while a buy signal applies to small properties. That said, since the standardized prices of both large and small hotels have softened, this situation calls for keeping your powder dry. Although interest rates for both Class A and Class B&C hotels fell 74 basis points (bps) this quarter, hotel interest rates are higher by 45-50 bps relative to June 2022. Moreover, the delinquency rate on hotel loans rose this quarter. As in the prior period, borrowing costs still exceed returns on hotels. Based on our leading indicators of hotel price performance, we can expect to see hotel prices continue to falter next quarter. This is Volume 12, Issue 2 of the CREF Hotel Indices.
Year Ends; Trend Continues
Liu, Crocker H.; Nowak, Adam D.; White, Robert M. Jr. (2024-02-06)
The price performance of hotels by region was worse this period than in the prior period, with only the Pacific and New England regions posting small single-digit gains. Hotels in non-gateway cities fared better than hotels in gateway cities, although the prices declined for hotels in both types of city. Transaction volume fell year over year but rallied quarter over quarter for both large and small hotels in gateway and non-gateway cities. Standardized prices of both large and small hotels continue to soften, indicating that investors should continue to keep their gunpowder dry. On the bright side, hotel debt financing continues to fall both on a quarter-to-quarter and year-over-year basis. In addition to this, the riskiness of hotels has narrowed relative to other major types of commercial real estate, although the delinquency rate on hotels rose imperceptibly this quarter. As in the prior period, the borrowing costs still exceed the return on hotels. Expect to see a faltering in the price of large hotels and an uptick in prices for small hotels next quarter, based on our leading indicators of hotel price performance. This is Volume 12, Issue 4, of the CREF Indices series.
Higher Interest Rates Hinder Hotel Price Momentum
Liu, Crocker; Nowak, Adam; White, Robert M. (2023-11-08)
The price performance of hotels by region was mixed in the third quarter of 2023. The Midwest, Mid-Atlantic, Mountain, and West South Central posted positive quarterly and year-over-year results. In contrast, New England and the South Atlantic regions struggled, and the Pacific region recorded only slight year-over-year gains. Hotels in non-gateway cities continued to outperform those in gateway cities. Transaction volume fell year-over- year and quarter-over-quarter. However, volume is up this quarter for large hotels and hotels in gateway cities. Based on moving averages, a “hold” signal is indicated for large hotels, with a “buy” signal for small properties. That said, the situation calls for keeping your gunpowder dry, given that the standardized prices of both large and small hotels have softened. Hotel interest rates for both Class A and Class B and C hotels rose about 3.6 percent this quarter and approximately 4 percent year over year, even as credit spreads tightened and the delinquency rate on hotel loans fell this quarter. Looking at commercial property categories, the delinquency rate on hotels is now lower than both retail and office properties. As in the prior period, the borrowing costs still exceed the return on hotels. Expect to see an uptick in the price of large hotels in the next quarter, while prices for small hotels falter, based on our leading indicators of hotel price performance. This is volume 12, number 3 of the hotel indices series.
Hotel Sustainability Benchmarking Index 2023
Ricaurte, Eric; Jagarajan, Rehmaashini (2023-06-06)
For the ninth consecutive year, the annual Cornell Hotel Sustainability Benchmarking research reveals a general decrease in energy and water usage among the participating hotels. The decrease is largely associated with the pandemic which shook the world and granted no exception to the hospitality industry. For this reason, low occupancy rates and hotel closures are major contributors to the decreased energy and water consumption reported, as compared to the 2019 calendar year data set. A total of 25,576 hotels from 31 international hotel groups took part by providing data on their water and energy use for the calendar year of 2021. Of the total, around 50 percent of the data set comes from hotels in the United States. The data do not account for individual hotel amenities in terms of energy or water usage, but they do allow hoteliers and potential visitors to see benchmarks for different hotel segments and locations. Despite the challenges faced by the industry, the study continues to present a strong picture of the industry’s performance over the years. To provide a more robust and useful data set of the industry for benchmarking and to promote improvements in energy, water, and carbon performance, the authors encourage additional hotels and hotel chains to take part in CHSB2024, especially those in the lower tier segments, which are not as strongly represented.
Mixed Signals Portend Greater Uncertainty Ahead
Liu, Crocker; Nowak, Adam; White, Robert Jr. (2023-04-14)
Although hotels showed continued positive price momentum in all regions from the prior year (year over year), prices faltered in some regions from the prior quarter, especially in the Mid-Atlantic and to a lesser extent in the South Atlantic regions. Hotels in non-gateway cities continued to outperform hotels in gateway cities, albeit the gain was relatively small compared to prior periods. The transaction volume for both large hotels and small hotels declined again this quarter as well as relative to the previous year. Based on our moving averages, a buying opportunity currently exists for both large and small hotels, although it might pay to continue to keep the gunpowder dry. Not surprisingly, the volume of hotel loan originations fell, while the interest rate on hotel loans continued to rise. Although lenders have reduced the amount of additional compensation they require to make hotel loans relative to other commercial real estate loans (i.e., hotel risk assessment), Wall Street’s valuation of REITs reveals an expectation of higher relative risk for hotels. Since the borrowing costs continue to exceed the return on hotels, economic profit and shareholder value added remain negative, indicating that anticipated future price gains are the primary driver of hotel investment performance. Looking towards the next quarter, our leading indicators of hotel price performance indicate that we should expect price momentum to moderate or decline for both large and small hotels.
Music Refrain: One More Time
Liu, Crocker; Nowak, Adam; White, Robert Jr. (2023-02-01)
The price of hotels showed strength in all regions except the South Atlantic this quarter, with all regions except New England experiencing double-digit growth year over year. Hotels in non-gateway cities posted higher quarterly and yearly gains relative to gateway cities, with the non-gateway hotels’ prices increasing 4 percent for the quarter, compared to 2 percent for gateway properties. On a year-to-year basis, non-gateway hotels recorded a 19-percent increase versus 3 percent for gateway properties. However, regardless of price changes, the transaction volume for all hotels (that is, both large hotels and small hotels) fell this quarter. With regard to price, small hotels appear to be undervalued (while large hotels range from correctly priced to overvalued) based on both a 3-year and a 5-year moving average. The cost of hotel debt financing continued to rise this quarter, as well as year over year. Lenders are requiring relatively more compensation for hotel loans relative to the 10-year risk-free rate due to increased perceived risk. As in the previous period (Q3 of 2022), our economic-value-added and shareholder-value-added metrics continue to indicate that the cost of borrowing exceeds the return for hotels. Looking toward the next quarter (i.e., near term), our leading indicators of hotel price performance indicate that we should expect slower or declining price momentum for larger hotels but not necessarily for smaller hotels. This is volume 11, issue 4 of the hotel indices series.
Long Small Hotels, Short Large Hotels
Liu, Crocker; Nowak, Adam; White, Robert Jr. (2022-10-19)
The price of hotels showed particular strength in the Mid-Atlantic, Pacific, and West South Central regions, while other regions experienced positive growth albeit at a slower rate relative to the previous period. Hotels in non-gateway cities posted higher quarterly gains relative to those in gateway cities, increasing 2 percent compared to a drop of 4 percent for gateway hotels. With regard to yearly prices, hotels in non-gateway cities increased 21 percent as compared to a rise of 1 percent in gateway cities. The transaction volume on all hotel transactions (both large hotels and small hotels combined) mimicked the previous quarter’s sales volume. The prices of small hotels appear undervalued (while those of large hotels appear overvalued), based on both 3-year and 5-year moving averages. Mortgage volume for hotels fell slightly for the most recent quarter, while the the cost of hotel debt financing has continued to rise quarter to quarter, as well as year over year. In short, lenders are requiring relatively more compensation for hotel loans relative to the 10-year risk-free rate due to increased perceived risk. The rise in borrowing cost will dampen enthusiasm for undervalued hotel properties, since our EVA and SVA metrics continue to indicate that the cost of borrowing exceeds the return for hotels. Looking toward the next quarter, our near-term leading indicators of hotel price performance indicate that we should expect slower or declining price momentum for large hotels but not necessarily for small hotels.
Heading into Economic Headwinds
Liu, Crocker; Nowak, Adam; White, Robert Jr (2022-07-26)
The price of hotels rose in all regions except the Mid-Atlantic this quarter. Hotel prices in the Mountain and South Atlantic regions reached new statistical highs, while hotel prices in the Pacific region continued to remain above their statistical high. Hotels in non-gateway cities posted higher quarterly gains relative to gateway cities, as non-gateway prices increased 5 percent, compared to 3 percent for hotels in gateway cities. The transaction volume on all hotel transactions ((both large hotels and small hotels combined) surged 27 percent this quarter (61% year over year). Median prices also rose this quarter for both large and small hotels as well as hotels in non-gateway cities while hotels in gateway cities declined 23 percent. The prices of large and small hotels appear to be undervalued based on moving averages. However, the cost of hotel debt financing rose sharply this quarter, as well as year over year. Lenders are requiring relatively more compensation for hotel loans relative to other commercial real estate, and to the 10-year risk-free rate due to increased perceived risk. The rise in borrowing cost will dampen enthusiasm for undervalued hotel properties, since our EVA and SVA metrics indicate that the cost of borrowing exceeds the return for hotels.

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