Hotel Sales Dive, but Local Properties See Occupancy Rise

The hospitality market pulled in $8.7 billion in sales during the first half of 2008, the lowest level among major property types and down 77 percent from the same period a year ago, according to Grubb & Ellis Co.’s second quarter “Capital Markets Update.” The cap rate hit 8 percent for full-service hotels, a 50-basis-point decline over the past quarters, while the cap rate for limited-service properties came in at 9.7 percent, an increase of 70 basis points.While higher prices at the pump have caused many consumers to shrink their retail expenditures, it appears that local hotels are seeing a silver lining. Occupancy rates at local hotels have trended upward, as many vacationers opt to travel closer to home instead of embarking on longer journeys, according to “Americas MarketView,” a paper by Raymond Wong, director of Americas research operations for CB Richard Ellis Inc.Meanwhile, luxury and upscale rooms are realizing stronger occupancy rates than midscale and economy accommodations. The reduction in business travel has been somewhat counterbalanced by a soft U.S. dollar, a macroeconomic factor that has spurred more interest among foreign tourists.