According to the report, attitudes toward trends in valuation, financing, tourism and restructuring are slowly turning positive. The first two issues may have the most immediate short-term impact on the sector, said Michael Fishbin, the global leader of the company's Hospitality & Leisure Practice.

"Accurately determining the value of a hotel property or portfolio remains a challenge to the industry in the wake of the global financial turmoil, but the sector may be nearing the peak of capitalization rate increases. We expect some recovery in underwriting and a rise in transaction activity this year, as investors and sellers come to a consensus around value," Fishbin said.

The report also details that more finance options should re-emerge, led by public and privately-held investment groups, and that more budding companies will consider initial public offerings this year. This year will also see an increase in tourism, including emerging attraction countries such as China, India and Brazil.

The big chains are trying to capitalize on emerging markets. For example, Wyndham Hotels and Resorts just added three new luxury hotels in three China provinces. "Asia is ahead of the curve in the economic recovery," Tom Monahan, with the Wyndham international division, tells GlobeSt.com. "Asia is going to be the growth engine of any global company."

Finally, Tim Behle, an E&Y senior manager, says restructuring efforts by owners and lenders are intensifying. "From a fundamentals perspective, we are hitting bottom," Behle says. "The shrinking supply pipeline coupled with strengthening demand will bolster the recovery of the lodging sector."

Instant Insights /

E&Y Says Hotel Value, Funds Will Rise in 2010

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