NEW YORK— If hotel investors want to rake in the highest risk-adjusted returns available in the acquisitions marketplace, they should now be targeting second-tier geographic markets, according to a report by Hotel Investment Strategies, LLC. The rationale behind this strategy is that on a risk-adjusted basis, a portfolio of second-tier hotels typically outperforms a portfolio of top-tier hotels in the mid to later stages of an upcycle, a stage that the hotel industry may currently find itself in. The report further pointed out that the key to garnering higher returns during the next few years is to spot the small cities that will exhibit much faster return growth than average. Second-tier markets currently include the likes of Austin, TX; Cleveland; Indianapolis; Omaha, NE; and Richmond, VA.
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