A Transaction-based Hotel Property Price Index for the UK

"The purpose of this paper is to develop a transaction-based hotel property (real estate) price index for the UK (HPPI). Transaction-based indices overcome reliability problems of appraisalbased indices because actual transaction values are used as opposed to subjective appraised values. Additionally, unlike appraisal-based methods, this indexing method accounts for the heterogeneity of hotel properties thus allowing ""like-with-like"" comparisons (i.e. they are constant quality indices). Information on 500 hotel transactions in the UK that took place in the period between 1996 and 2004 is obtained from the UK Hotel Property Transactions Database (HPTD). The database is developed and maintained at the Caledonian Business School. HPTD data were collected from multiple sources, including public sources, and interviews with different consultancies, valuation and brokerage firms. This initial data has been augmented with data mining of other databases (e.g. tourist boards, individual property and hotel association registers and websites, specialised hotel databases, and governmental sources), content analysis of different sources and surveys with property owners. Property data include information about property names, sale prices, time of sale, location, buyers and sellers and their agents, and physical characteristics of the property. The data will permit a hedonic regression analysis to produce an overall value index for the UK. Analysis will be pool-based, only one multiple regression is estimated for the entire properties, and year dummies will be introduced in the model which will be utilised to develop the index. Explanatory variables used in the regression will include number of rooms at time of sale, property age in years, meeting and banquet facilities, ownership form of sellers, affiliation with major lodging chain, market-segment, regional dummies, golf, tennis, number of pools, food & beverage outlets, location, economic data, time of sale, etc. Results are interpreted and cross-validated using evidence and different views from the literature. Potential of HPPI in enhancing investment decision is discussed. Finally, a future research agenda is proposed. "