Float, Don't Fix, the Interest Rate on Hotel Debt

Topics:
Lodging,
Real Estate Services
Tags:
Cornell University,
Debt,
Finance,
Financial Accounting,
Financing,
Interest Rate,
Investment
Source:
Cornell University

Vendor Registration: required

Overview: This study examines the viability of floating-rate debt financing strategies by investigating the time-series relationships between LIBOR, the index typical used in floating-rate debt contracts, and RevPAR, a proxy for hotel revenues. The strong correlations found from this analysis suggest that hotel investors who match interest payments with hotel revenues by utilizing floating-rate debt, and not exclusively relying on fixed-rate financing, can successfully manage the financial distress of debt.

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Format: PDF | Size: 619KB | Date: Jan 2005 | Pages: 32

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