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Insiders Find Sound Investment in Hotels

CHICAGO-In the face of rising oil prices and devastating natural disasters, investors continue to find opportunity in the lodging market. Chicago, ranked fourth in the country for number of rooms available, has seen a number of hotels trade hands this year alone.

By Dana Dubriwny | Updated on April 29, 2006

CHICAGO-Despite rising energy prices and weather-inflicting business disruptions, consumer spending has remained constant, and leisure travel has returned. For hotel investors, these indicators, in addition to low interest rates and booming capital markets, have translated into a bottomless basin of opportunity.

The hotel market has made a sweeping turnaround from only five years ago. When the economy turned sour in 2000, tourism slowed; when the events of Sept. 11 occurred, tourism came to a screeching halt. “It was pretty bleak for a number of years,” admits Lawrence Geller, CEO of locally based Strategic Hotels & Resorts. “But by the middle of 2003, we started seeing customers talking about meetings, we saw the airlines starting to build more capacity, we started to see resorts charging more rates, so we started seeing positive market indicators.”

With the strength of those indicators continually improving, it sparked the interest of many public and private investment firms. According to Marcus and Millichap’s most recent hospitality research report, lodging REITs will have raised approximately $800 million of secondary and preferred equity through the end of January 2006. This is compared to $220 million in the fourth quarter of 2005.

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