Journal of Hospitality Financial Management Journal of Hospitality Financial Management

Abstract

This paper analyzes the performance of five real estate sub-sectors (office, retail, industrial, apartment, and hotel) over a 10-year (historical) period, 1992 to 2001, to assess the impact the hotel sub-sector would have on investment performance when constructing a multi-property investment portfolio. The research was built on the foundation of modem portfolio theory, and data were analyzed using correlation analysis, Sharpe ratio, and a portfolio simulation model. Research results suggest that, at least during the study period, the hotel sub-sector outper-formed all other sub-sectors in terms of total returns and produced the second best risk-adjusted returns. The results also suggest that the inclusion of hotels in the real estate investment portfolio had a sigruficant impact on the efficient frontier, offering several "higher risk-higher returnff target options for an investor. As such, the significance of the hotel sub-sector within a - m ~ l t i - ~ r o ~ e r t ~ real estate investment folio is better understood.