The Value of Location for Urban Hotels

This study finds that hotel location significantly contributes to the property market value. With a sample of more than 600 hotel sales transactions within the Chicago Metropolitan Statistical Area (MSA), the theory that properties located closer to the city center, that is, the Loop, carry market value premiums is tested and supported by the data. Despite being the predominant spatial value driver for hotels, the effect of proximity to the city center is found to be heterogeneous. An additional mile away from the Loop decreases property value by 13% on average when the hotel is located within the 10 miles from the Loop. However, value decreases at a much lower pace when hotels are located outside this 10-mile buffer. Other spatial variables, such as access to transportation systems and neighborhood dimensions, show that accessibility and environment play a lesser but decisive role in hotel market value. Practitioners and researchers may benefit from these findings mostly when comparing and analyzing hotel market values in a context similar to the urban structure of Chicago.