We recently received a multi-million dollar conduit loan with a fixed rate, below seven percent. As in all real estate, knowing the market is the key to the deal. On a nationwide basis, consumer travel demand has increased faster than new supply. Forecasts from Smith Travel Research predict this year to be flat in occupancies and small rate gains in most areas, but no great slowdown is predicted anywhere. Interestingly, the Southeast seems to be the one area fighting the severest doldrums, but even here the numbers are still very profitable.
Gas prices affect tourist markets, but the backbone of the business is the business traveler.
I would point out that the only way to be passive with a hotel is to buy into a syndicated deal that someone else manages, and you only fill the role of limited partner. There are a number of deals put together that way, and a local accountant or real estate broker may have some leads to point you to someone with a project. Other than that, prepare yourself to be actively involved in the operation of the property, even if you use a management company. My experience is that if you take your eye off the operation, it will get out of control quickly. Pricing hotels is a little more involved than the rule of thumb gross revenue multiplier.