Second Quarter 2017 Edition of the US Extended-Stay Lodging Report

 

homewood-suites-by-hilton-frederick-exterior-1080853The Highland Group has just issued the second quarter 2017 report on the US extended-stay lodging industry. Report highlights for extended-stay hotels:

  • Fastest quarterly supply growth since 2009
  • Strongest mid-year demand growth since 2010
  • Fourth consecutive mid-year period with double-digit room revenue increase
  • Sixth consecutive quarter of RevPar growth above 3%
  • Rooms under construction up 22% over the past year

I find it interesting that with U.S. extended-stay hotel supply growing as fast as it did in 2009,  revenue is STILL climbing at double-digit rates. That is simply phenomenal.

Most analysts expect the rate of increase to slow as a result of new supply. I feel this is realistic. But think about what this means: extended-stay RevPAR has reached new record-highs, and with this as the STARTING point, the rate of growth may decelerate. We’ll take that. It will achieve great results for our investors.

That’s why we remain optimistic about the near-term and mid-term future of our industry.

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Hilton Asks Us About their New TRU Brand

Hilton recently interviewed us for input on their new TRU brand. Springwood has been one of the pioneers of this brand, so that wasn’t surprising. Our answers may someday appear in some Hilton promotional material, but YOU can see all of them below. Enjoy!

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  1. What have been the biggest challenges in the midscale segment and how do you think Tru by Hilton addresses them?

Inconsistency has plagued this segment for decades. Guests are forced to play “reservation roulette” when they book a mid-priced room, and that simply isn’t fair. Years ago we managed a beautiful Comfort Inn in our hometown, but business travelers were reluctant to book there due to in consistency of the brand nationwide. We’ve seen no such hesitancy with TRU.

  1. Why did you decide to invest in Tru by Hilton?

There were many corporate room nights that we were leaving to other brands, because their budgets didn’t permit them to pay the minimum room rates at our hotels. With the TRU brand, we can compete for – and win – that business. By doing so, we’ll build greater corporate-booking loyalty to our local team and properties.

  1. What motivated you to bring a Tru by Hilton to your city?

See #2. The other reason is that quality hotel development sites are difficult to obtain. Both of our TRU’s are developed on smaller sites that others tried to develop, but they could not lay out a conventional select-service hotel with adequate room count to achieve the necessary return on investment. TRU is so compact that we were able to successfully develop both sites and make the numbers work, without shrinking the number of guest rooms. TRU is a godsend for hotel developers who may have passed over smaller sites in healthy markets. Now those sites can make sense.

  1. What are you most looking forward to for the Grand Opening of your property?

Too late for that. The cake was really good.

  1. Insight from our current owners helped mold Tru by Hilton into a brand that was “engineered by hotel owners.” Keeping this in mind, what has it been like to do business with Hilton?

We are blessed to participate in the Owners’ Councils for several Hilton brands, and we know that Hilton appreciates and acts upon “bottom-up” feedback. We’ve seen it first-hand. We know, for instance, that the TRU concept initially had no king-sized beds. Owners spoke up, and before the first TRU ever broke ground, there were king beds in TRU’s. There are numerous examples of this bottom-up design with TRU. The same feedback system works for Hilton’s other brands, as well.

  1. What has been your experience with Tru by Hilton’s turnkey model?

There have been several teething issues, and Hilton is working to solve problems as they crop up. We suppose this is normal for a new brand; we’ve just never been bleeding-edge developers before.

  1. Tru by Hilton has been identified as a brand with the fastest-growing pipeline in industry history. Why do you think that is?

See #2 and #8.

  1. Where would you say Tru by Hilton fits in your portfolio? What does it add?

See #2. The surprise has been the enthusiastic response to the brand by millennial travelers. The input we receive from them is “over the top.” One seasoned millennial traveler we spoke with compared our TRU to an Aloft, which we personally never expected to hear, and he was dead serious. Another was so excited about the TRU common spaces that he told us, “I am going to look for a TRU wherever I travel.” We do not ever recall this strong a positive response to a new hotel brand, and initial guest response to Home2 Suites was very strong.

  1. After speaking with guests and hotel owners, it’s clear travelers in the midscale segment want consistency. Given this feedback, why do you think Tru by Hilton’s all new-build hotel model will be appealing to owners and guests?

Hilton knows how to run a consistent brand, and they will be “on their game” with TRU because the stakes are enormous. We don’t expect much slack from Hilton on quality – for us or for anyone else. That’s just the way it has to be for the brand to succeed.

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Welcome to the Future of Hotels

01 The New TRU03 Play Area in Lobby

Millennials are driving innovation in Hilton’s hotel portfolio. They’ve already overtaken Baby Boomers as the single biggest driver of hotel demand worldwide. FYI individuals born between 1982 and 2004 are considered to be Millennials; these folks are currently aged 13 to 35. They view the world differently.

Their preoccupation with smartphones leads them to put a premium on having fun and gathering with other real humans. As a bonus, having fun with humans makes a good backdrop for selfies. The philosophical shift from the Boomers’ “collecting things” mindset to the Millennials’ “collecting experiences” quest has been very good for the hotel industry. Experiences require travel, and this generation is travelling a lot more than their parents did. Despite the explosion in AirBNB bookings, the hotel industry is quite healthy, thank you.

Hilton is a market leader who has thoroughly researched this phenomenon and created two entirely new hotel brands designed to delight Millennials. Their Home2 Suites brand burst on the scene in 2009 (oops) and is now one of the fastest-growing brands in history. TRU by Hilton is their newest foray into Millennial segmentation. It’s a complete re-think of what a Millennial would like in a hotel, and it is on track to become THE fastest growing brand in the history of hotels. Both brands will disrupt the hotel market.

We’re opening the third TRU by Hilton in the world today, June 30, 2017. One Millennial who viewed these photos told me, “Wow, a Foosball table! I want to stay at a TRU.” That was easy. Some will have pool tables or ping pong tables – we opted for Foosball in our TRU’s. The lobby is designed as THE gathering place for food, for play, for working, or just for hanging out.

The rooms are more compact, but that’s simply because they’ve done away with the traditional big dresser and big soft chair. They’re replaced by a narrower wooden shelf (with wire drawers below) where the 55″ TV is placed, and a comfortable task chair with swinging arm to hold a tablet or a microwave meal. Both are smaller than what they’ve replaced, and that excess space has been squeezed out of the room. There’s no loss of walking space, and no loss of functionality. Genius.

Maybe best of all is the room rates. TRU is positioned in the market below a Hampton Inn & Suites, so guest stays at a TRU will cost less. Yes, it will create problems for LaQuinta, Comfort Inn, Wingate, and others. It will be fun to watch this brand soar.

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Win a Free Night in Lancaster, PA!

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Simply go to the following link and watch the video to enter the FREE ROOM contest: TRU by Hilton Lancaster, PA

Good luck!

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All Springwood Hotels Earn Awards. Again.

TA Generic Cert of Excellence

Every Springwood hotel open a full twelve months once again earned the coveted TripAdvisor Certificate of Excellence award. This is one of the most difficult industry awards to earn, because it is the direct result of guest feedback on the massive TripAdvisor interactive website.

It is remarkable that every one of our hotels has been able to achieve this honor from TripAdvisor.com consistently, for several years in a row.

The Certificate of Excellence is awarded annually to hotels that consistently receive Very Good and Excellent reviews. You may have noticed this designation before either on TripAdvisor listings (shown next to a company ranking) or have seen a sticker at one of your favorite local businesses. To get the TripAdvisor Certificate of Excellence Award, businesses must:

  1. Maintain Very Good and Excellent reviews (a 4 out of 5 rating)
  2. Receive a minimum number of reviews (the exact amount is part of the secret algorithm)
  3. Have been on TripAdvisor for at least 12 months

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Hotel Values in U.S. to Remain Stable for 3 Years: HVS

This is a reprint of an article by Jeff Weinstein in Hotels magazine online on 6/7/2017:

HVS’ Hotel Valuation Index (HVI) Overview Report on 38 U.S. markets and the nation was released this week, indicating which market areas are experiencing positive valuation trends and, thus, may present good investment opportunities.

Here is the overview in a nutshell:

  • Values in most U.S. markets are expected to remain generally stable for the next three years.
  • If you are looking to the market to deliver value appreciation, be prepared to wait eight to 10 years. For the next several years, ROIs will be driven by property related strategies, not by overall market appreciation.
  • New supply is not a significant risk in most markets because supply is being absorbed; construction financing is becoming more challenging; and entrepreneurial incentives have been declining for the past couple of years.
  • It is still unclear how the current administration’s policies will affect labor availability, interest rates, and corporate taxes, among other variables. These will all influence hotel values.
  • Cap rates have increased slightly.
  • Seattle, Portland and Denver have more limited potential for value appreciation due to significant new supply.
  • Cleveland, Wilmington, Delaware, and other tertiary markets have the potential for the most near-term value appreciation because of a small development pipeline. Houston is also recovering from its valuation decline caused by low oil prices.
  • New York is still one of the top-performing markets in the country, showing resilience in demand and occupancy; however, rates and profitability are anticipated to be challenged until 2020. RevPAR is expected to be recovered by then. Large supply increases are getting absorbed and are expected to continue, but it is having a negative impact on rate. Tourist arrivals remain at an all-time high. Values are expected to remain stable. Cap rates remain between 5% and 6%, and in the low single digits for luxury properties.
  • Major gateway cities are still very attractive for international buyers.

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York County Tourism Grant Committee Announces First-Ever Round of Awards

The York County Tourism Grant Committee announced Wednesday that it awarded more than $800,000 to 18 projects selected as the first-ever recipients of York County Tourism Grants.
After receiving more than 60 applications totaling more than $10 million in requests, the Committee chose recipients based upon a project’s ability to boost tourism in York County, while tapping into industry trends and maximizing economic impact through overnight stays, said Eric Menzer, Chair of the Grant Committee and President of the York Revolution.
“Today we’re funding an array of innovative projects that represent a broad range of ideas to grow tourism and enhance the visitor experience in York County,” Menzer said. “When we started this journey, we said we wanted projects that would make the greatest impact, and the Committee believes the first class of recipients has set a high bar for future awards.”
Grants will be awarded to the following organizations:
  • Military Vehicle Preservation Association: $32,000 to bring the International Convention of the Military Vehicle Preservation Association to York
  • Mason-Dixon Business Association: $2,500 for Discover Delta and the marketing of recreation, history, shops and restaurants
  • Red Lion High School Student Council: $10,000 to assist with the hosting of the 2017 PA Association of Student Councils State Conference in York
  • York County Rail Trail Authority: $100,000 to complete the Northern Extension of the Heritage Rail Trail*
  • YWCA York: $7,861 for the YWCA York’s Synchronized Swimming Meet
  • York Expo Center/York Fair: $66,000 for the York Agricultural Society Action Plan for the Future*
  • York Expo Center/York Fair: $55,350 to host the AAU Middle Atlantic Wrestling Association’s Eastern National Wrestling in 2019 and 2020*
  • York Expo Center/York Fair: $30,000 for Wi-Fi upgrades at the York Expo Center
  • We Build You Play Sports Group: $45,000 for the York Invitational volleyball competition
  • Borough of Spring Grove: $13,000 to create the Smoke in the Grove BBQ Competition
  • Bailey Leasing, Inc.: $5,250 for a York County Promotional Motorcoach
  • Steam Into History: $40,000 for an additional coach to expand operations
  • YMCA of York and York County: $40,000 for improvements to the Graham Aquatic Center for competitive swim events
  • City of York: $225,000 for Memorial Park softball field improvements*
  • Main Street Hanover: $50,000 for Downtown Tourism Development Program
  • Hanover Area Historical Society: $5,000 to market the Carriage House Museum
  • Susquehanna Heritage: $50,000 for Susquehanna Riverlands – Zimmerman Center hour expansion and destination marketing
  • York County History Center: $50,000 for Tourism Asset Development for the new York County History Center
*Indicates multi-year grant
In addition to the $826,961 that will be distributed to these 18 projects, the committee has also reserved $100,000 for a York County branding initiative between the York County Community Foundation and Downtown Inc.
“The grant program has always stressed the importance of collaboration. Upon receiving multiple applications seeking funding for a York County branding initiative, we decided to schedule a meeting with the various organizations to work toward that goal in a cohesive way,” Menzer said.
“I also have to say that this was incredibly difficult,” Menzer added. “It’s very clear that there was huge pent-up demand for this program. I assume some of the applicants will hone their ideas and apply again in the next round or next year. Fortunately, with a predictable funding source we will be able to have this kind of impact every year for the foreseeable future.”
Wednesday’s grant awards are the culmination of years of lobbying that resulted in a 2016 state law allowing York County and more than 50 other counties to further invest in local tourism through their hotel room tax rate.
York County Commissioners were the first in the state to take advantage of the new law when they raised the local hotel room tax rate from 3 percent to 5 percent last spring. The new rate went into effect in July, with 33 percent of all room tax revenue now dedicated to the grant program. 
 
After receiving applications in February, the Grant Committee spent more than two months reviewing them before reaching a decision. The York County Convention & Visitors Board of Directors ratified the Committee’s selections May 4.
“The Board thanks the Grant Committee for its diligence and dedication to funding projects that will draw more people to York County and enhance their experience while they’re here,” said Liz Winand, Chair of the YCCVB Board of Directors. “This is a wise investment of the York County hotel room tax and a sign that our already flourishing tourism industry has even greater days ahead.”
The York County Tourism Grant Program will open for a second round of smaller awards starting July 10. The maximum grant request will be $10,000. Approximately $60,000 is available.
As was the case for the first round, all grant applicants must provide a 25 percent cash or in-kind match. The Grant Committee will announce Round 2 recipients by October 12.
The timetable for the next round of large grants will be similar to this year, with an application period opening in early 2018 and awards by June.
Questions about the application process may be directed to the York County CVB.
In addition to Menzer, the York County Tourism Grant Committee is comprised of State Representative Kate Klunk, York County Commissioner Susan Byrnes, York County Economic Alliance President and CEO Kevin Schreiber, RKL Partner and YCCVB Board Member Rob Berkebile, Springwood Hospitality CEO Dave Hogg and Hanover Area Chamber of Commerce Marketing and Public Relations Director Katy King.
The York County Convention & Visitors Bureau’s Mission is to maximize tourism expenditures and their economic impact in York County, PA, through comprehensive tourism sales and marketing programs. The York County CVB’s Vision is for a York County where tourism is recognized for the value of its economic impact and its role in raising the profile of York County as a sought-after destination. For more information on the York County Convention & Visitors Bureau, call 1-888-858-9675 or visit www.yorkpa.org.

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