Only hotels in the South Atlantic region experienced a positive price momentum during this period.* The performance of hotels in non-gateway cities declined at a faster rate relative to those in gateway cities. Hotel financial operating performance has finally returned to positive profitability with operating profit exceeding both a hotel property’s operating costs as well as financial (borrowing) cost, based on economic value analysis (EVA). The price of larger hotels has spiraled downward at a faster rate than that of smaller hotels and repeat sale hotels. The cost of hotel debt financing, as well as equity financing, has declined, with virtually no change in the relative risk premium for hotels. However, the spread between the 10-year Treasury and the 3-month Treasury has fallen even further into negative territory, which continues to raise concerns over its impact on market liquidity as well as its contribution to slower price growth in hotels (since this is a recession indicator). A reading of our tea leaves suggests prices are expected to decline for both large and small hotels. This is report number 32 of the index series.