A period of irrational hotel development drive by ulterior motives has seen properties being built that are not economical in operations, use of real estate and ultimately investment. The industry must depart from its obsession with full-service hotels and embrace more realistic investment criteria, should hotels ever become a trading asset class with reasonable liquidity, attracting investors from around the globe.
Controlling labor cost is paramount and too many properties cannot drive sufficient business to justify their expenses. Most hotels are too large, both in number of units and gross floor area and feature excessive food and beverage and meeting facilities. The combination of the above factors creates poor investment returns that cannot be, and were rarely, justified on a standalone basis. As a result, the market for hotel transactions lacks liquidity; an insurmountable pricing gap separates sellers, who are looking to justify their excessive development cost, and buyers, who see little value due to poor performance from oversupply.