The (or cap rate) for a is used as a way to compare potential returns on  various real estate investments. Different operating metrics can be used, however, is most frequently cited. To determine a hotel’s cap rate, divide the NOI (or other metric selected) by the hotel’s total value.

Hotel industry example: According to a 2019 sales and capitalization rate trend report by HVS, as of year-end 2018, implied REIT cap rates had increased by 230 basis points compared to year-end 2017 because of the stock market correction and concern regarding slowing hotel NOI growth mixed with higher interest rates.

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