Determinants of Hotel Property Prices

Abstract

Pricing commercial real estate has its foundations in present value theory. Recent improvements for accessing transaction data have stimulated interest in commercial property hedonic pricing models, the structures of which follow traditions in single-family real estate in that the implicit prices of property characteristics and sitespecific variables represent city and national market conditions. Adding present value variables has become increasingly common to account for general market conditions. We test two hedonic pricing models; one that follows the residential tradition and another that departs by incorporating city-specific net operating incomes and the discount rates. Modeling prices in these alternative ways allows for recognition of the relative contributions of property, city, and capital market determinants. Empirical testing relies on a sample of hotel transactions from 2005-2010. The responsiveness of hotel cash flows to market changes is an important consideration. We find that models with property characteristics perform about the same as models that also include present value variables. A plausible explanation for this phenomenon is that implicit prices corresponding to property characteristics and site-specific variables appear to reflect income streams associated with city and nationwide economic conditions.

Factors that Affect Location Choice of Hotel Property in Bauchi Metropolis, Nigeria

“…According to (Corgel and White ( 2015), a Washington based hotel consultant, there are many different kinds of hotels, and three major ones are, hotels for travelers, commercial and resort. The transient hotel is usually located within city boundaries and caters to people travelling for business or pleasure.…”

“…The location decision is important because opening a business costs a lot of money, the retailer is committed to the location for a long period of time even with a lease, competition is getting tougher and a good location is one way to beat the competition, and problems such as store saturation, an uncertain economy, and tough zoning laws are making good locations harder to find. Simply estimating probable sales is not enough in a location decision, the types of customers who are candidates for the merchandise sold by the firm, the prospects for future growth in the trading area, customer lifestyles, and probable future competition should be considered (Russell, 2013;Yang et al, 2014Corgel et al, 2015).…”

The Value of Going Green in the Hotel Industry: Evidence from Beijing

“…Hotel scale is measured by the total number of rooms ( ROOMNUM ). As for hotel age, the literature always adopts effective age, which is calculated as the time elapsed since the last renovation (Corgel, Liu and White ). This is optimized by two variables: a dummy variable indicating whether the hotel has been renovated ( RENOVATION ) and the year since opening or the latest renovation ( AGE ).…”

“…The hedonic pricing model is employed, which regresses prices on product attributes to estimate consumers’ marginal willingness‐to‐pay for the individual attributes of a differentiated product (Rosen , Kuminoff, Zhang and Rudi ). Following standard practices, we specify the hedonic pricing model with the following flexible functional form: where ln( R it ) is the log‐transformed daily room rate of hotel i on date t ; GREEN i is the dummy variable indicating green certification; L i , S i and X i are vectors of hotel attributes as described in Table , which cover the major hedonic characteristics of hotels suggested by Kuminoff, Zhang and Rudi () and Corgel, Liu and White (); G i , a group indicator, is added to capture the influence of potentially omitted locational characteristics and market conditions; T t is a vector of date dummies to control for the time trends of hotel room rates and ε it is the error term and clustered at the hotel level.…”

“…where ln(R it ) is the log-transformed daily room rate of hotel i on date t; GREEN i is the dummy variable indicating green certification; L i , S i and X i are vectors of hotel attributes as described in Table 2, which cover the major hedonic characteristics of hotels suggested by Kuminoff, Zhang and Rudi (2010) and Corgel, Liu and White (2015); G i , a group indicator, is added to capture the influence of potentially omitted locational characteristics and market conditions; T t is a vector of date dummies to control for the time trends of hotel room rates and ε it is the error term and clustered at the hotel level.…”