REIT Ownership and Property Performance: Evidence from the Lodging Industry

Prior research on the impact of real estate investment trust (REIT) ownership on property performance is very limited and provides inconclusive empirical evidence. Whether REITs add value at the micro-level remains a puzzle. Utilizing a dataset of detailed accounting information for individual hotels across five states in the United States, we re-examine the performance of REIT-owned properties. Unlike prior research that focuses on revenue-based performance measures, we examine both the top-line and bottom-line performance of hotel operations. We find that REIT ownership favorably impacts property performance in that REIT-owned hotels have higher profit margins than other lodging properties. The greater cost efficiency is likely attributable to savings in non-distributed operating expenses and fixed charges. We document no outperformance by REITs in revenue growth at the individual property level.