Abstract
The main objective of this study is to investigate the size and direction of appraisal bias in the lodging sector. The hypothesis that appraisals of hotels are biased upwards is tested by comparing hotel appraisal prices (values) with their associated transaction prices in a sample of 480 hotel loans that were securitized by commercial mortgage-backed securities (CMBSs) between 2010 and 2019. The results of the study show an upward bias, and a significant negative effect of the loan-to-value (LTV) ratio on appraisal bias consistent with the observation that a decrease in leverage will increase appraisal bias. Additional findings reveal that an increase in appraisal bias is associated with an increased probability of default.
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