WASHINGTON, DC- One of the last major hotel deals in the Washington, DC area occurred in July, when Host Hotels & Resorts inked an agreement to acquire the 888-room Grand Hyatt Washington for $442 million.

Now what is the hotel industry here to make of the announcement yesterday that Host Hotels is pulling out of the deal?

One immediate conclusion is that the $500,000 per key price point seen in a few deals in the city this past year will be more of an exception than the rule. The REIT would have acquired the Grand Hyatt Washington for $442 million, including the assumption of a $166 million mortgage loans. That brought it very close to $500,000 per room—a price rarely seen except with the St. Regis trade.

The DC area, however, has rarely achieved such pricing with hotels, with the long-term averaging being in the $300,000 per key range for higher-end purchases. More worrisome is an overall slowdown in hotel deals nationwide, which is also being reflected here, even as smaller, one-off boutique trades happen.

Much of this slowdown is due to the larger economic uncertainty, both in the US and Europe, as well as a rocky stock market, which is both good and bad news for the hotel industry. Sector fundamentals might be good, but companies are leery of deals, especially high-ticket ones such as the Grand Hyatt. That, at least, is Mike Barnello’s view. The president and CEO of Bethesda, MD-based LaSalle Hotel Properties weighed in on the issue in this NAREIT video.

“As a result of the third quarter I think a number of buyers moved their expectations,” Barnello says, “both in terms of initial yield and returns they’re looking for on a short term basis.”