Posted by  Dave Hogg

An updated lodging forecast released by PricewaterhouseCoopers (PwC), reflecting better year-end results for 2011, anticipates pricing recovery to be the key driver of revenue per available room (revPAR) growth in 2012. Despite a year that was marked by macroeconomic uncertainty, and resulting shaky consumer and business confidence, hotels in theU.S. ended 2011 on a strong note.

Lodging performance exceeded expectations in the fourth quarter, in part due to a short-term uptick in economic activity. Hotels across the spectrum of price segments experienced occupancy and average daily rate (ADR) gains in 2011, reflecting the breadth of the recovery. Overall, hotel occupancy in 2011 recovered to 60.1 percent, slightly ahead of its 10-year average of 60 percent.

Despite a still-uncertain economic environment, improved occupancy levels and a recovery in travel are expected to give hotels the confidence to increase prices in 2012. PwC’s latest lodging industry forecast expects revPAR growth of 6.5 percent in 2012, heavily driven by ADR increases.

PwC’s quarterly lodging forecast reflects an updated macroeconomic forecast released earlier this month from Macroeconomic Advisers, LLC, which expects economic growth in theU.S.to continue to be weighed down by spillover effects from the sovereign debt crisis inEurope. Macroeconomic Advisers’ outlook expects slow real gross domestic product (GDP) growth during the first half of 2012, followed by a gradual acceleration in economic activity, reaching an above-trend pace of 2.9 percent annualized growth by the fourth quarter.

In the face of a still-uncertain economic environment, the outlook for improved pricing in the lodging sector reflects the ongoing recovery of business travel, as well as gains in corporate events and other group business. As a result, lodging demand in 2012 is expected to increase 1.8 percent, which combined with restrained supply growth of 0.5 percent is expected to boost occupancy levels to 60.9 percent, the highest since 2007.

Increased confidence from occupancy gains, particularly in the higher-priced segments of the industry, is expected to allow hotels to achieve valuable increases in room rates. As a result, ADR is expected to increase by 5.1 percent in 2012, driving a revPAR increase of 6.5 percent.

“It will have been a five-year detour, but continued recovery in 2012 is expected to lift industry revPAR very close to its 2007 peak,” said Scott Berman, principal andU.S.industry leader, hospitality & leisure for PwC. “The steepest portion of the demand recovery is behind us with operators’ focus on room rate becoming increasingly more important.”

YouTube http://youtu.be/Le1tp7xCDGU

With business and leisure travel growing, the average price for a hotel room rose 4.3% nationwide last year and is expected to climb further this year, helping the industry rebound from the Great Recession.

The higher rates also reflected the limited growth in the number of new hotels, according to industry analysts.

Last year’s increases and this year’s projections came in separate studies that looked at hotel bookings over the last year and advance bookings into the next nine months.

At the end of December, hotel rates nationwide were up 4.3% from a year earlier, to an average daily rate of $107.56, according to a study released Friday by STR Global, a hotel research firm in Nashville.

The number of hotel rooms in the U.S. grew only 0.6% last year, said Jan Freitag, senior vice president at STR. In contrast, the hotel industry added rooms at a rate of 2.2% a year over the last 20 years, he said.

Fewer hotels were built last year because banks were more reluctant to finance hotel construction, he said.

“The limited number of rooms gave the hotels pricing power,” Freitag said.

Hotel rates are expected to climb 3.6% this year as demand continues to grow, according to the study by TravelClick, a New York company that provides booking software and business data for major hotel chains worldwide.

(Posted by Dave Hogg)

The above is a reprinted excerpt from the 12/14/11 Citi North America Equity Strategy Newsletter

Posted by Dave Hogg

Here are some excerpts from an October 20^th 2011 article by Rachael Spann Urie,  Director, Public Relations of STR, that appeared in HotelNewsNow.com.  The big news she points out is that the U.S. hotel industry RevPAR in September 2011 grew 10% over September 2010:

• September’s strong demand in both the transient and group segments
• Solid RevPAR increases were measured across all the chain-scale segments
• Overall U.S.hotel industry occupancy rose 5.7% to 63.3%
• Overall U.S.hotel industry average daily rate was up 4% to $103.40
• Overall U.S.hotel industry RevPAR ended the month up 10% at $65.47
• Among the chain-scale segments, occupancy in the luxury segment rose 6.9%, followed by the upper-midscale segment which rose 6.2%.

Dave Hogg

23 Oct 2011

The American phoenix is slowly rising again. Within five years or so, the US will be well on its way to self-sufficiency in fuel and energy. Manufacturing will have closed the labour gap withChinain a clutch of key industries. The current account might even be in surplus.

Assumptions that the Great Republic must inevitably spiral into economic and strategic decline – so like the chatter of the late 1980s, when Japan was in vogue – will seem wildly off the mark by then.

Telegraph readers already know about the “shale gas revolution” that has turned America into the world’s number one producer of natural gas, ahead of Russia.

Less known is that the technology of hydraulic fracturing – breaking rocks with jets of water – will also bring a quantum leap in shale oil supply, mostly from the Bakken fields in North Dakota, Eagle Ford inTexas, and other reserves across the Mid-West.  (And of course the Marcellus region of central PA and southern NY! – Dave Hogg)

“The US was the single largest contributor to global oil supply growth last year, with a net 395,000 barrels per day (b/d),” said Francisco Blanch from Bank of America, comparing the Dakota fields to a new North Sea.

Total US shale output is “set to expand dramatically” as fresh sources come on stream, possibly reaching 5.5m b/d by mid-decade. This is a tenfold rise since 2009.

The US already meets 72pc of its own oil needs, up from around 50pc a decade ago.

“The implications of this shift are very large for geopolitics, energy security, historical military alliances and economic activity. As US reliance on the Middle East continues to drop, Europe is turning more dependent and will likely become more exposed to rent-seeking behaviour from oligopolistic players,” said Mr Blanch.

Meanwhile, the China-US seesaw is about to swing the other way. Offshoring is out, ‘re-inshoring’ is the new fashion.

“Made in America, Again” – a report this month by Boston Consulting Group – said Chinese wage inflation running at 16pc a year for a decade has closed much of the cost gap. Chinais no longer the “default location” for cheap plants supplying the US.

A “tipping point” is near in computers, electrical equipment, machinery, autos and motor parts, plastics and rubber, fabricated metals, and even furniture.

“A surprising amount of work that rushed to China over the past decade could soon start to come back,” said BCG’s Harold Sirkin.

The gap in “productivity-adjusted wages” will narrow from 22pc of US levels in 2005 to 43pc (61pc for the US South) by 2015. Add in shipping costs, reliability woes, technology piracy, and the advantage shifts back to the US.

The list of “repatriates” is growing. Farouk Systems is bringing back assembly of hair dryers toTexas after counterfeiting problems; ET Water Systems has switched its irrigation products to California; Master Lock is returning to Milwaukee, and NCR is bringing back its ATM output toGeorgia. NatLabs is coming home to Florida.

Boston Consulting expects up to 800,000 manufacturing jobs to return to the US by mid-decade, with a multiplier effect creating 3.2m in total. This would take some sting out of the Long Slump.

As Cleveland Fed chief Sandra Pianalto said last week, US manufacturing is “very competitive” at the current dollar exchange rate. Whether intended or not, the Fed’s zero rates and $2.3 trillion printing blitz have brought matters to an abrupt head for China.

Fed actions confronted Beijing with a Morton’s Fork of ugly choices: revalue the yuan, or hang onto the mercantilist dollar peg and import a US monetary policy that is far too loose for a red-hot economy at the top of the cycle. Either choice erodes China’s wage advantage. The Communist Party chose inflation.

Foreign exchange effects are subtle. They take a long to time play out as old plant slowly runs down, and fresh investment goes elsewhere. Yet you can see the damage to Europe from an over-strong euro in foreign direct investment (FDI) data.

Flows into the EU collapsed by 63p from 2007 to 2010 (UNCTAD data), and fell by 77pc in Italy. Flows into the US rose by 5pc.

Volkswagen is investing $4bn in America, led by its Chattanooga Passat plant. Korea’s Samsung has begun a $20bn US investment blitz.  Meanwhile, Intel, GM, and Caterpillar and other US firms are opting to stay at home rather than invest abroad.

Europe has only itself to blame for the current “hollowing out” of its industrial base. It craved its own reserve currency, without understanding how costly this “exorbitant burden” might prove to be.

China and the rising reserve powers have rotated a large chunk of their $10 trillion stash into EMU bonds to reduce their dollar weighting. The result is a euro too strong for half of EMU.

The European Central Bank has since made matters worse (for Italy, Spain, Portugal, and France) by keeping rates above those of the US, UK, and Japan. That has been a deliberate policy choice. It let real M1 deposits in Italy contract at a 7pc annual rate over the summer. May it live with the consequences.

The trade-weighted dollar has been sliding for a decade, falling 37pc since 2001. This roughly replicates the post-Plaza slide in the late 1980s, which was followed – with a lag – by 3pc of GDP shrinkage in the current account deficit. The US had a surplus by 1991.

Charles Dumas and Diana Choyleva from Lombard Street Research argue that this may happen again in their new book “The American Phoenix”.

The switch in advantage to the US is relative.  It does not imply a healthy US recovery. The global depression will grind on as much of the Western world tightens fiscal policy and slowly purges debt, and as China deflates its credit bubble.

Yet Americaretains a pack of trump cards, and not just in sixteen of the world’s top twenty universities.

It is almost the only economic power with a fertility rate above 2.0 – and therefore the ability to outgrow debt – in sharp contrast to the demographic decay awaiting Japan, China, Korea, Germany, Italy, and Russia.

Europe’s EMU soap opera has shown why it matters that America is a genuine nation, forged by shared language and the ancestral chords of memory over two centuries, with institutions that ultimately work and a real central bank able to back-stop the system.

The 21st Century may be American after all, just like the last.

(THAT IS, if we don’t stop ourselves from developing these valuable resources!    I believe that Evans-Pritchard gets it right here.  It’s about time someone published it.  Congratulations, Daily Telegraph!)

Dave Hogg

The North American hotel industry continues to show strength and stability, according to Tim Hart, executive VP of business intelligence for TravelClick.

For the next 12 months, committed occupancy on the books is up 4.8% year-over-year, average daily rate is up 4%, and revenue per available room is tracking ahead by 6.5%, according to TravelClick’s October 2011 North American Hospitality Review.

The group and business sectors are particularly strong.

“Rates are improving,” Hart said.

While retail rates have shown strength, the metric hasn’t grown as strongly as it should have because the hotel industry is still burning off the lower-priced corporate and group rates negotiated during the downturn, he said.

TravelClick expects steady improvement in ADR to fuel RevPAR growth in the high single digits for the rest of the fourth quarter, and possibly into the 10% range by the first quarter of 2012, Hart said.

Cheers!

Dave Hogg

• Marriott International Inc. (MAR) posted strong third-quarter revenues and provided an upbeat outlook for its lodging business, even as Wall Street is checking out of hotel stocks on concerns that an economic slowdown will cut travel spending.
• Marriott said that in the fourth quarter it expects 5% to 7% growth in revenue per available room — or revpar, a key profit metric — and said it’s “cautiously optimistic” about 2012.
• Marriott’s stock is down 32% so far this year and shares of Starwood Hotels and Resorts Worldwide Inc. (HOT) is down 34%. Hotel real estate investment trusts were the worst performing in the sector last quarter slumping roughly 30%.   (See why we’re glad our hotels don’t depend on Wall Street pricing?  Performance up, stock price down!  What’s with that? – Dave Hogg)
• Average daily rates rose 4.1%, while revpar grew 6.9%, or 7.4% excluding the Middle East and Japan.

Have a great day!

Dave Hogg

Springwood Companies is proud to announce its rank of “37” on the fifteenth annual list of the fifty top businesses making significant contributions to the growth, strength and success of theCentral PA economy.

“The combined strength of our hotel and multifamily divisions has driven significant returns for our investors in recent years.  It is an honor to be recognized by the business community for the growth that has led to this accomplishment,” saidDavid Hogg, CEO of the Springwood Companies.

The Central Penn Business Journal hosted an awards breakfast event Friday at the Hilton Harrisburg to recognize the winners and announce their ranks. In addition, the “Top 50 Fastest Growing Companies” will be profiled in a special supplement to the September 23, 2011 issue, with information on each company’s financial growth.

In order to be eligible for nomination, companies had to be public or private, for-profit entities headquartered in Adams,Cumberland, Dauphin,Lancaster,Lebanon, Perry orYorkCounty. They were required to show revenue of at least $500,000 in each of the fiscal years ending 2008, 2009, and 2010; then demonstrate revenue growth for 2010 as compared to 2008.

SF&Company calculated the nominations and then ranked the companies according to revenue growth over the three-year period. Both dollar and percentage increases were taken into consideration, which led to the list of the 2011 Top 50 Fastest Growing Companies, consisting of both large and small companies.

Springwood Companies, based inYork,PA, have developed and operate more than one million square feet of property in centralPennsylvania, including nearly 450 hotel guest rooms and nearly 700 apartments.  It has been honored with numerous industry awards for operational excellence.  Its hotel developments are funded by private individuals seeking portfolio diversification and better-than-stock-market returns.

The “Top 50 Fastest Growing Companies Awards” are a program of the Central Penn Business Journal and is presented by SF&Company.  More information about the awards program and winners can be found on the Central Penn Business Journal’s website at www.CentralPennBusiness.com.

“WASHINGTON, DC – REITs experienced their fair share of turmoil last month thanks to the unusual macroeconomic and political events. The end result, according to NAREIT figures just posted on the association’s website: the FTSE NAREIT All REIT Total Returns Index fell 5.06% for the month. They still managed to slightly outperform the broader markets, as the S&P 500 was down 5.43% and the Russell 2000 Total Return Index down 8.7%. NAREIT did not return a call from GlobeSt.com in time for publication…”

Think about it.

Dave Hogg