The common goal for hotel operators and those who provide asset management on behalf of owners and investors is generally to maximize income with the minimal capital necessary to maintain the quality and value of the hotel. Typically this entails effectively marketing the property, driving revenue per available room and investing wisely. This is a sound strategy for a long-term owner such as a public REIT, which typically holds an asset for a minimum of seven to 10 years.

But when an individual investor or private equity fund acquires a hotel, the investment horizon will often be less than five years. In those cases, from the moment the asset is acquired, the focus must be on the maximization of value upon exit — whether it be five, three or even one year later. In fact, for a three- to five-year hold strategy, post-acquisition, 65 percent to 85 percent of the internal rate of return will be driven by the exit sale price: The cash flow is more important for its influence on