Over the past year, the U.S. hotel sector has suffered from limited liquidity, resulting in part from the shutdown of the debt securitization markets but also from the general banking crisis. This subsequently lowered the leverage available to fund transactions, making it more difficult for investors to value assets, which consequently disconnected buyers and sellers. Based on Jones Lang LaSalle Hotels’ proprietary database, which tracks hotel transactions $10 million and above, U.S. hotel transaction volume during the first three quarters of 2008 reached $7.5 billion, down 80 percent from the same period in 2007. Portfolio transactions slowed the most, accounting for less than half of the volume, down from 72 percent of total volume in 2007. The average transaction size declined as well, with just 15 transactions exceeding $100 million, compared to 49 during the first three quarters of 2007. Due to continued liquidity constraints, 2008 year-end transaction volume is estimated to range between $8.5 billion and $9 billion. Total transaction volume in 2008 will thus correlate with the volume experienced during 2003 and 2004, but will be significantly more robust than the levels seen during the trading low point of 2001 and 2002.The U.S. government’s announcement of preferred equity investments in lending institutions has prompted liquidity indicators to contract, a sign of increasing liquidity. Swap spreads and prices of credit default swaps associated with financial institutions have contracted as well, indicating an easing in the perception of overall credit risk. However, equities remain volatile, making predictions about where the market will move next more difficult.Governments around the world have implemented tactics aimed at injecting liquidity and stimulating lenders to once again make capital available to fund acquisitions and convince sellers of assets that this is a market worth selling into. While the debt markets are highly selective, there are still pockets of opportunity for deals with stable cash flow and strong sponsorship. Arthur Adler is managing director & CEO of the Americas for Jones Lang LaSalle Hotels.