Donnelly made the remarks during a recent conference hosted by the National Association of Real Estate Investment Trusts. He predicts 10% to 15% total returns on lodging REITs this year. But he says pockets of regional weakness created by the souring economy will plague lodging REITs during the next six months, when he believes the industry will hit the bottom of its growth trough. He forecasts a rebound for late this year and early next year.

"Despite the near-term weakness we see for lodging, we believe the fundamentals for 2002-2003 could not be better," he says. "It is our view that supply growth is perhaps the single most important determinant of future revenue growth and operating profit in the hotel business."

The supply growth is dropping significantly--from 4.2% in late 1999 to 2.7% at the end of last year, with forecasts for this year 2.5% and next year at 2%. A lack of financing means new construction is falling behind expectations, which may translate into fewer hotels seeking building permits. "This supply environment clearly benefits the owners of existing properties," he says.

Recommended For You

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM Digital Member, you’ll receive:

  • Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
  • Educational webcasts, white papers, and ebooks from industry thought leaders
  • Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
NOT FOR REPRINT

© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to asset-and-logo-licensing@alm.com. For more information visit Asset & Logo Licensing.