Hospitality Industry Beta Average
Prepared By Kurt Harris for KPB Equities

Introduction

Examining the correlation of movement between the stock prices of hospitality companies and the overall securities market, otherwise known as “Beta,” and compiling those findings to best estimate the beta of a new or non-existing company is a common process in quantitative analysis. The necessity of an accurate beta for new or existing companies cannot be understated in the importance of relation to the proper valuation of equity.

Methodology

To accurately ascertain beta we used a sampling of hospitality companies within the United States. These companies can be categorized into two separate but similar divisions: Real Estate Investment Trusts (REIT,) whose sole investments include direct hotel investments and/or hotel financing, and either operational holding companies managing several hospitality brands or directly managed hospitality companies.

The sampling of hospitality companies were chosen selectively for their ability to fit within the parameters of the study. Those parameters include construction costs, square footage, population size of host city, population density, height of the building, and similarity to subject city (Salt Lake City, Utah.)

Results

Construction costs on hotels ranging from 8-25 stories in the continental United States yield estimates of between $72.3MM and $78.4MM. The average size of these hotels is between 400,000 and 500,000 Sq. ft. (RSMeans.) KPB Equities’ capital budget for construction is estimated to be ~$70-80MM, which, according to national data, should finance a hotel with 8-25 stories and ~450,000 square feet.

Salt Lake City has a population density of 731.2 per square mile or ~200,000 people within city limits. SLC receives an average of 4.18MM visitors each year from tourism or business. Other cities that fall