NEW YORK CITY-The US lodging industry is currently operating in unprecedented economic and capital market environments. While it appears that the bottom of the worldwide economic reseat that began two years ago may have been reached, the damage done to US lodging investments has yet to be fully absorbed by the market.

The dearth of transaction data in the CB Richard Ellis YTD Q3 2009 Major US Hotel Sales Survey reflects the near frozen state of the national hotel investment market. A mere 21 sales, totaling roughly $1.6 billion for 7,600 rooms--on average $210,000 per room--were transacted in the US through the first three quarters of 2009. Excluding the $775-million trade of the Treasure Island Hotel & Casino in Las Vegas, there have only been:

• Three US hotel trades greater than $100 million;
• Two US hotel sales between $50 million and $100 million;
• Three trades of US hotels between $20 million and $50 million;
• Twelve US hotel sale transactions under $20 million.

It is significant to note that excluding the Treasure Island Hotel & Casino transaction, the four largest US hotel trades--totaling approximately $475 million--were all reportedly negotiated in 2008, and closed in 2009 for myriad reasons.

Against a backdrop of continued weak economic fundamentals, the scarcity of US hotel sale transactions this year is the result of:

• A continued, albeit narrowing, of the gap between buyer bid and seller ask prices;
• A continued disruption in credit markets resulting in a significant lack of financing;
• Existing creditors thus far exhibiting little, if any, appetite to foreclose on an increasingly wide array of US hotel mortgages that are in technical and/or monetary default.

During the near term "once in a generation" US hotel investment opportunities will be successfully made by knowledgeable hospitality focused "value investors." Many of these sponsors will be concentrated on acquiring unique and durable assets located in "high barrier to entry" markets. Continued illiquidity in the credit markets, coupled with depressed hotel operating metrics will prolong the challenges for many existing hotel owners. These will include significant cash flow disruptions, inability to refinance, and reduced capital for needed renovations.