The performance of REIT-owned properties and the impact of REIT market power

Using a unique, detailed panel dataset of lodging properties, this paper tests whether properties owned by real estate investment trusts (REITs) perform differently than other properties and whether the concentration of real estate ownership brought about by REITs has increased market power. Our results demonstrate that REIT-owned properties, which are primarily mid-scale and high-end hotels, did not perform significantly better, on average, than other mid-scale or high-end hotels in the same geographic area. However, because of the superior overall performance of mid-scale and high-end hotels, REIT properties as a whole did perform better, on average, than non-REIT properties. From these results we conclude that the superior performance of REIT properties was due to the fact that REITs tended to acquire properties in market segments that performed well; REIT ownership in itself does not appear to have increased performance. Our results also suggest that the superior performance of the market segments in which REITs have a significant presence is not attributable to the market power of the REITs.