Center for Hospitality Research Indices

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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.
Beware the Ides of March
Liu, Crocker; Nowak, Adam; White, Robert Jr (2022-04-18)
The price of large hotels fell by .25 percent, while that of smaller hotels increased 3.3 percent this quarter. On a regional basis, the MidAtlantic had the best quarterly gains, with the Pacific region also doing well, while the Midwest suffered price declines. Hotels in both gateway and non-gateway cities continue to post positive performance, with greater gains for hotels in non-gateway cities. Transaction volume declined this quarter (from the previous quarter), although it was still stronger relative to the same quarter last year. Our moving average trendlines indicate that both large and small hotels are priced to buy. Large hotels continue to decline, while smaller hotels are rising, based on our standardized unexpected price (SUP) performance metric. In terms of financing hotels, mortgage-financing volume continued to rise, although the cost of financing hotels rose sharply this quarter. The relative risk premium has remained stationary this quarter, although the hotel delinquency rate has declined along with the riskiness of hotels compared to other major types of commercial real estate. Hotel deals continue to look profitable based on our economic value added (EVA) and shareholder value added (SVA) metrics, although they are nearing breakeven. Looking toward the next quarter, our leading indicators of hotel price performance indicate that in the near term we should expect slower or declining price momentum for both large and small hotels.
Converging Towards Normalcy
Liu, Crocker; Nowak, Adam; White, Robert Jr (2022-01-20)
Hotel prices continue to converge toward pre-pandemic levels. Gains posted were smaller relative to the previous quarter but higher year over year. Hotels in both gateway and non-gateway cities continue to exhibit positive performance, with hotels in non-gateway cities posting greater gains. Transaction volume continued strong for large and small hotels quarter over quarter and year over year, although the increase in volume was smaller in this instance than was the increase in the prior period. Our moving average trendlines indicate that large hotels are priced to buy, while small hotels are priced at market (priced fairly). Large hotels declined from their statistical high set last quarter, based on our standardized unexpected price (SUP) performance metric. In terms of financing hotels, mortgage financing volume continued to rise, as the cost of financing hotels slightly diminished this quarter. Among factors that have contributed to this situation are the relative risk premium, which has remained stationary this quarter, and a continued decline in the hotel delinquency rate. Hotel deals continue to look profitable, based on our economic value added (EVA) and shareholder value added (SVA) metrics. Looking toward the next quarter, our leading indicators of hotel price performance indicate that we should expect slower or declining price momentum for larger hotels but positive price gains for smaller hotels.
Pole Vaulting to New High
Liu, Crocker; Nowak, Adam; White, Robert Jr (2021-11-01)
Hotel prices continued to gain ground during the recent quarter, regaining losses incurred during the pandemic. Prices in all regions are reverting to their long-term average, with hotels in the Pacific and South Atlantic regions rising above their standardized average. Hotels in both gateway and non-gateway cities continue to exhibit positive performance, although hotels in the gateway cities have posted greater gains. For both large and small hotels, transaction volume increased both quarter over quarter and year over year. Our moving average trendlines indicate that large hotels are priced to buy, while small hotels represent an opportunistic buy at best. Large hotels reached a new statistical high based on our standardized unexpected price (SUP) performance metric. Mortgage financing volume rose, given that financing costs were lower this quarter. Among factors that have contributed to this situation are the facts that the relative risk premium remained stationary this quarter and that the hotel delinquency rate has continued to decline. Our economic value added (EVA) and our shareholder value added (SVA) are positive, indicating that hotel investment based on operating performance is currently financially feasible. Looking toward the next quarter, our leading indicators of hotel price performance indicate that positive price momentum should continue to exist for both large and small hotels.
Hotel Sustainability Benchmarking Index 2021: Carbon, Energy, and Water
Ricaurte, Eric; Jagarajan, Rehmaashini (2021-09-21)
The annual Cornell Hotel Sustainability Benchmarking study, published for the eighth consecutive year, finds a general reduction in energy and water usage among the participating hotels over the past three years (2017 -2019). However, a slight increase in usage is reported among full-service resorts, a new grouping established for this year’s reporting. A total of 21,432 hotels from 26 international hotel chains participated by contributing information regarding their energy and water usage. Over 60% of the total data comes from hotels in the United States. While the data permit hoteliers and potential guests to see benchmarks for various hotel segments and locations, individual hotel amenities are not accounted for in terms of energy or water usage. The authors encourage additional hotels and hotel companies to participate in the study, as increased participation allows us to build a stronger and more meaningful data set of the industry for benchmarking and to drive improvements in energy, water, and carbon performance.
Second Quarter 2021: Are We There Yet?
Liu, Crocker; Nowak, Adam; White, Robert Jr (2021-07-15)
United States hotel prices have rebounded above their statistical lower bound in all regions except the Mountain states, signaling a return toward their pre-pandemic level—although we are not quite there yet. Prices of hotels in gateway cities rose 6 percent, while hotels in non-gateway cities climbed almost 7 percent on average this quarter. Transaction volume also increased for both large hotels and small hotels, with large hotels rising 79 percent and small hotels, 57 percent on a quarter-over-quarter basis. Our moving average trendlines and standardized unexpected price performance metrics indicate that large hotels (those over $10,000,000) are fairly priced, while small hotels are opportunistic buys at best. The cost of debt financing for hotels declined approximately 17 basis points (bps) this quarter with interest rates currently at 5.55 percent for Class A hotels and 5.75 percent for Class B and C hotels. However, the spread in interest rates between hotels and other commercial real estate (relative risk premium) has widened slightly, from 211 basis points in March to 215 basis points at this writing. The total risk associated with hotel REITs has also increased relative to the total risk for other major types of commercial real estate REITs. This indicates that the capital market still perceives hotels to be relatively riskier, although the delinquency rate on hotel loans (currently at 14.27%) continues to decline from its high of 24.3 percent (June 2020) toward its pre-pandemic level of around 1.51 percent (2019Q4). Our economic value added (EVA) and new shareholder value added (SVA) metrics are negative, indicating that borrowing costs exceed operating performance. As a consequence, any deals done will be based on long-term price appreciation for the deal to pencil. Looking toward the next quarter, our leading indicators of hotel price performance indicates that positive price momentum should continue to exist for both large and small hotels.
The Phoenix Is Rising
Liu, Crocker; Nowak, Adam; White, Robert Jr (2021-04-19)
Although the price of hotels along the east coast declined again this quarter the rate of decline has continued to lessen. Hotels in gateway cities reversed course, outperforming hotels in non-gateway cities. Our moving average trendlines and standardized unexpected price performance metrics indicate that both large and small hotels remain undervalued, pointing to a buy opportunity. There are indications that lenders appetite for hotels continues to increase. A reading of our tea leaves suggests that we should see positive price momentum for both large and small hotels. This is report number 38 of the index series.
A Glimmer of Hope Amidst a Hemorrhage
Liu, Crocker; Nowak, Adam; White, Robert Jr (2021-01-20)
Prices of hotels along the east coast continue to drop, although the rate of decline has moderated. Hotels on the west coast enjoyed positive price momentum, both on a quarter-over-quarter or year-over-year basis. Hotels in gateway cities exhibited poorer price performance than those in non-gateway cities. Our moving average trendlines and standardized unexpected price performance metrics indicate a positive price reversal for large hotels, while the hemorrhaging continues for small hotels. There are indications that lenders are more willing to finance hotels going beyond best-in-class hotel properties, although the cost of financing and the relative risk premium remain high. This is report number 37 of the index series.
Hotel Sustainability Benchmarking Index 2020: Carbon, Energy, and Water
Ricaurte, Eric; Jagarajan, Rehmaashini (2020-11-13)
The seventh annual Cornell Hotel Sustainability Benchmarking study includes data from considerably more hotels than last year. While the bulk of the data still come from hotels in the United States, the study also recorded a greater international participation, with 55 nations and 20 international hotel chains represented. More than 18,000 hotels contributed information regarding their energy and water usage, as well as their greenhouse gas emissions. Complete as of 2018, the data show that the participating hotels have generally continued to reduce their energy and water usage. While the data permit hoteliers and potential guests to see benchmarks for various hotel segments and locations, individual hotel amenities cannot be accounted for in terms of energy or water usage. Data collection is now underway for CHSB2021 study, and the authors encourage additional hotels to participate, especially those in the lower-tier segments which are not as strongly represented here.

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