Measuring Lodging-Property Oerfirmance

Abstract

Noting the absence of reliable data about lodging-property returns for investment-decision purposes, the authors set out to develop the best possible index of lodging-property returns that can be formed from publicly available data. They discovered, however, that an index developed from such data is unsuitable for use in comparative performance measurement and for portfolio-allocation decisions. The problems they encountered include reporting inconsistency, absence of quarterly data, unreliability of capital-return information, and the lack of a consistent property sample. An appropriately designed, reliable lodging-property-return index would achieve the following goals: the index would be comparable to the most-common index used for other classes of real estate (the NCREIF index); the lodging-property index would have a large enough sample to be defensible, but not so large as to pose a reporting burden on the industry; and the index would be segmented into the property classes and geographic regions most useful to the hospitality industry.