“With a difficult lending environment and more conservative underwriting on the part of investors, deal activity in 2008 has tapered significantly,” Hennis states. “However, we still expect to see between $5 billion and $6 billion in assets change hands this year.”

The current acquisitions pace is less than one-fourth that of last year. At this point in 2007, over 190 properties traded, according to Hospitium. In contrast, only 45 upscale and luxury lodging facilities have
sold thus far in 2008. Moreover, market conditions continue to rein in per-room pricing, declining from
$202,000 in 2007 to $168,000 through the first half of this year.

“The debt markets, which helped to drive values in recent years, are not as competitive today,” notes
Hennis. “While debt is still available, the residential mortgage crisis and the struggling economy have
caused some lenders to pull away from the market. Consequently, the terms are less attractive with lower
loan-to-value ratios and higher spreads than what we observed during the peak of the cycle.” “The equity side of the deal has also changed,” states Hennis. “With an uncertain economic outlook, coupled with higher airfares and rising gas prices weighing on the travel industry, investors are more conservative in evaluating acquisition opportunities. Double-digit RevPAR growth projections are no longer supportable, with many operators anticipating a tough 2009.”

Hospitium is a hotel consulting firm that specializes in the upscale and luxury sectors of the lodging
industry. Hospitium provides advisory services and products, including feasibility studies, due diligence, underwriting, appraisals, strategic planning, and transaction guidance.