Beware the limitations of hotel cap rates
A capitalization rate, or cap rate, is a ratio that can be used to estimate the value of income-producing properties. Put simply, a cap rate is the percentage of net operating income (NOI) to property asset value. For example, a US$1.0 million sale price of a property that produces an annual net cash flow of US$90,000 results in a calculated capitalization rate of 9.0% ($90,000/$1,000,000). A comparatively lower cap rate indicates less risk associated with an investment, whil