Commercial real estate pricing has its foundations in present value theory although improved access to transaction data heightened interest in hedonic pricing models. Heretofore, the commercial property versions of these models follow traditions for pricing non-market rent paying durable assets, principally residential housing. We present a pricing model that departs from tradition by incorporating city-specific net operating incomes and the capitalization rates into the hedonic equation. Property attributes and location characteristics serve as proxies for unobservable, asset cash flows; city incomes account for local cash flow effects; and the capitalization rate represent local and national capital market influences. Modeling commercial real estate in this way allows us to recognize the relative contributions of property, local market, and national market determinants. Empirical testing relies on a sample of hotel transactions from 2005-2010. The choice of hotels stems from the responsiveness of these properties’ cash flows to market changes in the absence of lease friction and the homogeneity of the physical assets. Our model explains nearly 80 percent of the variation in hotel asset prices. We find that prices are collectively determined by property, city income, and capital market characteristics. Models only with property characteristics slightly outperform models with present value variables.