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Gross multipliers, per room costs and capitalization rates, more
or less, directly reflect SUPPLY (hotels for sale at any given time)
and DEMAND (active/qualified buyers). As is pretty much true with
real estate values and equity appreciation through history, the
lower the supply and higher the demand, the more prices will escalate.
I’ve watched, and probably played a small part in, gross income
multipliers climbing from three to four, back ten to fifteen years
ago, to five and higher through the past six years in southern California…..
Meanwhile, gross multipliers in most of the Western States have
risen into the 4 to 4.5 range. Unfortunately, these higher income
multipliers result in higher risk and much lower (if any) returns
on investment.
In 2002 I obtained my broker’s license in Montana, moved here (although
I still office and broker hotels in southern California), sold seven
hotels and purchased two in Western Montana, through 2006. These
lodging properties have all sold between 2.5 and 3.1 times gross
rental income. I’m now in my thirty-fourth year of hotel brokerage
and investment, encompassing Minnesota, Wisconsin, California and
now Montana. Western Montana’s three times gross average multipliers
will not last, of that I’m certain.
This Western Montana pristine geographical and very healthy economic
area is just now being discovered. Hotels are being developed here.
This year (2006) Hilton Garden Court hotels opened in Bozeman and
Missoula, a Marriott Courtyard opened in Missoula and probably five
more new hotels will open along Freeway I-90 in Western Montana…
Big Mountain ski and recreation area at Whitefish is undergoing
a $150,000,000 (2004 through 2007) overhaul and expansion. Big Sky,
between Bozeman and Yellowstone National Park, is developing exclusive
private golf courses, condominiums, homes, along with 15,000 to
20,000 sq. ft. estates for the rich and famous. Even Bigfork, a
three-block long town at the north end of Flathead Lake, north of
Missoula and southeast of Kalispel and Whitefish, has an exclusive
new golf course, yacht club, and hundreds of new homes/condominiums
being developed and sold from $300,000 to $1,500,000…. Flathead
Lake, the largest natural freshwater lake west of the Mississippi,
land frontage has tripled in price over the past ten years !
Western Montana includes both Glacier and Yellowstone National
Parks, realizing three to four million visitors each year. The winter
ski and recreation areas here are unsurpassed, with lift, accommodation
and daily cost rates twenty to forty percent below other popular
U.S. winter ski and snowmobile areas. Getting in and out of western
Montana is convenient and relatively inexpensive, with major airlines
serving international airports in Kalispell, Missoula, Helena and
Bozeman.
Bozeman’s State University, the University of Montana at Missoula,
Carroll College at Helena, and an extensive State community college
system, represent the highest standards in education and national
championship athletic programs. For States in which at least 50%
of the 2006 graduating seniors participated, Montana students ranked
number four nationally in the ACT average composite test scores
!
At three times gross, $25,000 to $40,000 per
room,
11 to 15% cash-on-cash rates of return,
a healthy economy and strong future growth,
Western Montana is about as good as it gets !!!
Jack Spears
T W O M O R E ! !
WE JUST SOLD
Ramada Limited at Bozeman
Redwood Lodge at Missoula
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