Abstract

http://ssrn.com/abstract=932947
 
 

Citations



 


 



Technological Change as Reflected in Hotel Property Prices


John B. Corgel


Cornell University


Journal of Real Estate Finance and Economics, Vol. 34, No. 2, 2007

Abstract:     
This paper investigates the effects of age on the sale prices of hotel real estate. Value erosion of commercial property due to the passage of time may be offset by renovation, although substantial follow-on investment usually occurs several years following construction. Obsolescence produces value losses during the post-construction period prior to new investment that result from technological change [Colwell and Ramsland 2003]. A hedonic model is specified to allow age to measure the effects of obsolescence in hotel prices. Although the long-run obsolescence rate for hotel properties of 1.93 percent per year aligns closely with the rate estimates elsewhere for retail properties, the path of obsolescence through time shows some marked departures. Contrary to the theory and the empricial results from the retail real estate market, hotel prices do not reveal much more obsolescence in the years immediately following construction than later. Also, the age and sale price relation turns positive nearing the third decade of the lives of hotels indicating a vintage effect. Thus, a V-shaped obsolescence function emerges that either may be explained by a fixed-cost renovation expenditure function or a vintage effect produced by the demand for surviving assets. A series of tests of hotel brand-specific obsolescence rates reveals considerable variation in these rates of among seasoned properties, perhaps an indication of a convex renovation expenditure function and sequential follow-on investment.

Keywords: technological change, hotel prices, functional obsolescence, property depreciation

Accepted Paper Series


Not Available For Download

Date posted: September 26, 2006  

Suggested Citation

Corgel, John B., Technological Change as Reflected in Hotel Property Prices. Journal of Real Estate Finance and Economics, Vol. 34, No. 2, 2007. Available at SSRN: http://ssrn.com/abstract=932947

Contact Information

John B. Corgel (Contact Author)
Cornell University ( email )
School of Hotel Administration
Ithaca, NY 14853
United States
607-255-4305 (Phone)
607-255-4179 (Fax)
Feedback to SSRN


Paper statistics
Abstract Views: 452

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo3 in 0.625 seconds