REIT Ownership and Property Performance: Evidence from the Lodging Industry

Shawn Howton, Shelly Howton, Johnny Lee and Mi Luo

Journal of Real Estate Portfolio Management, 2012, vol. 18, issue 2, 169-185

Abstract: Prior research on the impact of real estate investment trust (REIT) ownership on property performance is very limited and provides inconclusive empirical evidence. Whether REITs add value at the micro-level remains a puzzle. Utilizing a dataset of detailed accounting information for individual hotels across five states in the United States, we re-examine the performance of REIT-owned properties. Unlike prior research that focuses on revenue-based performance measures, we examine both the top-line and bottom-line performance of hotel operations. We find that REIT ownership favorably impacts property performance in that REIT-owned hotels have higher profit margins than other lodging properties. The greater cost efficiency is likely attributable to savings in non-distributed operating expenses and fixed charges. We document no outperformance by REITs in revenue growth at the individual property level.

Date: 2012
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DOI: 10.1080/10835547.2012.12089923

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