That's not to say transaction activity in this segment is overheated. It's not. Jones Lang LaSalle Hotels compiles statistics on hotel sales between $10 million and $50 million. Year to date, there have been 35 transactions in that category for a total volume of $673.3 million and an average deal size of $19.2 million. In 2008, the number of trades totaled 116, for an aggregate dollar amount of $2.4 billion and an average deal size of $20.8 million.

Rob Koger, president of Molinaro Koger, a hotel brokerage firm based in Washington, DC, divides the deal market into three categories: $15 million and below; $15 million to $50 million; and $50 million above. Even though velocity is down overall, deals under $15 million and in the range of $15 million to $50 million can still get done. "Once you get above $50 million, it becomes very difficult," Koger says. "The equity checks are much bigger and meeting certain return levels with that much equity out is challenging to underwrite today."

In the past few months, he reports that his firm has closed 10 deals, four of which were in the $30 million to $40 million range. Included on that list was the $30-million all-cash sale of the 104-key Raleigh Hotel in the trendy South Beach area of Miami. Molinaro Koger brokered the sale of the boutique hotel on behalf of New York City hotelier Andre Balazs.

What made the deal notable was that it was acquired by a group of high net worth investors, something Koger predicts will be the norm in the current capital-parched environment. "Without financing, it's hard for private equity to make the returns that they need," he states. "Similarly, institutional investors are very nervous and they are not going to be the lead buyers coming out of this. So we are seeing high net worth individuals, both domestic and international, become pretty much the likely buyer for assets like the Raleigh and other similar assets that are in the market or will be coming to the market."

On the sell side, Cahill says some owners of smaller hotels may simply want to exit their investment. "Maybe they already made their money and cashed out, so they are okay with selling at a slightly depressed price because their property's cash flow is holding up okay," he says.

Also in the mix are some distressed sales by lenders or servicers. "The truly troubled smaller assets are not worth the time and manpower to workout," he says. "So those are the first ones the distressed lenders put on the market."