While deferred capex must certainly be accounted for when accounting for NAV’s, the math shows it’s not that material for the public hotel owners.
By the end of 2010, hotel owners in aggregate will have under spent for two consecutive years in terms of maintenance capital expenditures. The following chart shows the trend as a percentage of revenues for the public hotel owners:
The following chart shows maintenance CapEx per hotel room. Under spending is clearly evident in this chart as well. However, even if you assume that 2008 peak spending is the right number, the maximum amount of under spending would total only $9,500 ($4,750 multiplied by 2 years of under spending). At best, deferred CapEx looks to be only $4,500 ($2,250 multiplied by two years) if we assume reversion to the trend line.
While the public companies have certainly cut back spending, they have not fallen that far behind. The situation for the private owners is quite different. Most of the major transactions we've seen involve significant amounts of deferred CapEx.