Mad Hedge Fund Trader

We Don't Need No Stinkin' Rally: Eye on Hotel REITs

Many hotel investors not only lost their hearts in San Francisco, they lost their wallets too. The New York Times highlighted the dire condition of the city’s hotel market. The occupancy rate in February plunged to 57.7%, the lowest since 9-11, with many luxury rooms going for less than $100 a night. The collapse in pricing has been exacerbated by the Internet, and first and foremost by the William Shatner inspired priceline.com, whose competitive offering system unleashes avalanches of cheap rooms dumped on the market. As a result, the average price of a room has dropped from $156.16 to $127.59 in a year. Many hotels acquired at the market top in 2004 and 2005 have cash burn rates so severe that they are in imminent threat of defaulting on loans.