"Capital flows to real estate have been declining since their peak in 1998; however, they remain at high levels relative to historical standards," says Alan Tantleff, executive vice president of Jones Lang LaSalle Hotels. "As an industry, we appear to be in much better shape today than we were in 1990, and while not a perfect parallel, 1990 was, in fact, the United States' last recession. In 1990, we had weak fundamentals--high inflation, weak GDP growth, declining profit margins, and most importantly, negative outflows to real estate."

But analysts in the early '90s predicted a prolonged recession, prompting many hotel owners to sell at record-low prices. With today's consensus opinion of a V-shaped recovery, JLL predicts that discounts will not be as deep as buyers may have hoped. Consequently, the firm is forecasting an orderly transaction market in 2002, marked by fewer sales compared to recent years. It does not foresee a wave of distressed sales, though prices will remain below peak levels.

Once the economy shows some clear signs of recovery, investors will return to the market with realistic expectations. And in the absence of panic selling, JLL concludes that value investors, not vultures, will dominate the market.