Title: The role of hotels in mixed asset portfolios: revisiting the asset-heavy versus asset-light debate

Authors: WeiKai Low; Prashant Das; Christophe Piffaretti

Addresses: Ecole hôtelière de Lausanne, HES-SO, University of Applied Sciences Western Switzerland, Route de Cojonnex 18, 1000 Lausanne, Switzerland ' Ecole hôtelière de Lausanne, HES-SO, University of Applied Sciences Western Switzerland, Route de Cojonnex 18, 1000 Lausanne, Switzerland ' Credit Suisse Real Estate Investment Management, SDRS 8, Sihlcity - Kalandergasse 4, CH-8070 Zurich, Switzerland

Abstract: This paper examines the role of hotels in Markowitz's mixed assets portfolios. First, we compare the efficient frontiers of pure-play asset portfolios, namely S&P indices, and hotels (REITs, REOCs and NCREIF). Further, we break the hotel stocks into asset-heavy versus asset-light categories. We find that mixing pure-play hotel assets into the portfolio pushes the frontier favourably in the north-west direction. Contrary to popular expectation, we find that asset-heavy hotel enterprises are favoured compared to asset-light stocks.

Keywords: hotel real estate; modern portfolio theory; asset-heavy; asset-light; Markowitz; hotels; mixed asset portfolios; hotel stocks.

DOI: 10.1504/IJBEAM.2015.075061

International Journal of the Built Environment and Asset Management, 2015 Vol.1 No.4, pp.273 - 292

Available online: 01 Mar 2016 *

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