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.