Monthly Archives: January 2012

Industry revPAR in 2012 expected to be close to its 2007 peak

This is an outright reprint of an article by Kerry Medina on,  January 23, 2012.   I believe the information it contains is vitally important for US hotel investors to know.

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 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.”

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Dave Hogg Featured in Harrisburg Interview

Recently Dave Hogg, CEO of Springwood Companes, sat down with Bill Gladstone and Rick Jordan to discuss hotel and retail development in Central PA going into 2012.  Dave explains why and how we are developing premium-branded hotels  now.  Watch it here:


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Hotel room prices rise 4.3% in 2011

By Hugo Martín, Los AngelesTimes, January 7, 2012

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)


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The Impressive Coming US Energy Story

For almost four decades, since the 1973-74 oil embargo, America has been struggling with energy supplies and the need to keep its economy powered by hydrocarbons. Various plans have failed to solve the problem, from CAFE standards to biofuels to electric cars and more. Yet, America stands on the verge of a major change that puts it on a course to near self-sufficiency, according to a past President of OPEC as well as Citi’s head of commodities research, Ed Morse. The Gulf of Mexico is expected to see production climb from 1.55 million barrels per day (mbd) of oil to 4.0 mbd by the end of the decade, while shale (or more correctly “tight”) oil could add another 2.0 mbd, while a shift to natural gas for heavy trucks could save the country from using another 0.5 mbd. In addition, auto efficiencies and a few other factors also may help. Overall, US imports of oil should drop from 9.0 mbd to 2.0 mbd, which easily can be purchased from Canada and Mexico. Keep in mind that 7.0 mbd would equal $700 million daily and more than $250 billion annually. The implications are simply stunning on America’s current account figures, trade balances and even potentially the positioning (and cost) of US military forces around the world. The increase in production of shale gas could also add millions of new jobs.

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

Posted by Dave Hogg


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