Billions of dollars have already been spent on hotel deals this year, and the pace probably will accelerate into 2006, further boosting lodging stocks, analysts and industry experts say.

Historically low interest rates and an abundance of capital have made hotels extremely attractive to investors chasing higher yields.

Another hotel deal catalyst has been a surge in construction costs -- up more than 30 percent in the last two years -- which has driven the inclination to buy rather than build.

Private equity group Blackstone has been one eager buyer, agreeing in June to acquire Wyndham International for $1.44 billion. That was on top of $5.1 billion it spent in 2004 to acquire hotel chains Extended Stay America, Prime Hospitality and Boca Resorts.

"The Wyndham deal is a good indicator of some of the things that will continue to happen," Dr. Laila Rach, Associate Dean of the Preston Robert Tisch Center for Hospitality, said in an interview.

"There are smaller hotel companies that will be acquired not only by companies such as Blackstone, but also by big hotel chains looking to fill their portfolios," she said.

Several analysts speculate that closely held Omni Hotels will be the next chain to get bought out. Sonesta International Hotels Corp. is also said to be a potential takeover target. Its shares have more than quadrupled this year.

Who's selling, who's buying

At the same time, chains like Starwood Hotels & Resorts Worldwide, Hilton Hotels Corp. and Fairmont Hotels & Resorts Inc. are shedding properties as they shift their focus from owning to managing and franchising.

The three companies have sold nearly $1.4 billion in assets over the past year and a half, using most of the proceeds to buy back more than $650 million in stock.

Both Starwood and Hilton have hinted at plans to sell several more properties in the coming months, which could translate into more stock buybacks.

Private equity firms, pension management funds and hotel real estate investment trusts are expected to be the buyers.

Hotel REITs such as DiamondRock Hospitality, Sunstone Hotel Investors, Strategic Hotel Capital Inc., Highland Hospitality Corp. and Ashford Hospitality Trust, all of which have gone public in the last two years, will likely be aggressive buyers in the year to come, analysts say.

"Coupled with continued recovery in operating margins, this should provide added juice to REITs earnings and dividend growth over time," Deutsche Bank analyst Marc Falcone said.

Host Marriott Corp, the largest U.S. owner of upscale hotels, in July said it plans to acquire more and keep its dividend growing.

Some hotel REITs are also selling properties. MeriStar Hospitality Corp.earlier this month said it planned to take advantage of a "favorable" selling environment. The company plans to use the proceeds to pay down debt and eventually buy more properties.

"A lot of people who held on to their assets because they missed the last run-up in asset prices in 1997 or 1998 are now taking the opportunity to cash in to show their investors they are able to make money on investments," said John Corgel, a professor at Cornell University's hotel school.

Shares to rise

Lodging stocks are trading at about 25.4 times their 2006 price-to-earnings ratio, already the upper end of the range in which the group has historically traded.

But several analysts expect that multiple to rise in the coming years, predicting that takeover deals in the industry will be made at very high price-to-earnings ratios.

"The move toward hotel chains selling portfolio assets and acquiring brands appears only in mid-phase right now, and will continue," Corgel said.

"And that's what investors want to see. They don't want assets lying around on your balance sheet, they want equity. and there's a lot more of that to come."