The U.S. Hotel Portfolio Transactions: Premium or Discount?

Abstract

Hotel, as part of the commercial real estate, is getting more and more attractive to the real estate investors in the form of portfolio transactions. By utilizing the hedonic pricing model, this study predicts the expected sale price of the hotels bundled within the portfolios and compares the expect portfolio sale price with the actual portfolio sale price to identify the premium and discount scenarios for the U.S. hotel portfolio transactions. The results show that, in general, about 70% of the U.S. hotel portfolios were transacted at a premium. Besides, the discount portfolios were traded at a very deep discount compared to the extent of premium for premium portfolios. In terms of the influencing factors of different scenarios, geographical diversification provides a boost to the premium scenario, however, other company-level information, buyer’s type and industry, and portfolio-level characteristics, portfolio size, are not significant indicators of the premium and discount situations.