Monthly Archives: September 2013

PKF Hospitality Research is predicting the rosiest picture of the hotel industry since 2007 in its September 2013 edition of Hotel Horizons. “It is very rare for us to say we have no concerns about the near-term outlook for the U.S. lodging industry, but that is what we see from our econometric models, as well as discussions with our clients,” R. Mark Woodworth, president of PKF-HR, said in a statement. “If you look at the factors that historically have derailed the good times for hotel profit growth, very few, if any, exist today.”

PKF-HR is predicting a 5.9 percent rise in RevPAR in 2013, 7.2 percent in 2014 and 8.1 percent in 2015. Occupancy for this year is predicted to rise 1.6 percent with ADR increasing by 4.2 percent. Next year occupancy is expected to rise by another 1.9 percent, with ADR increasing by 5.2 percent.

On a less optimistic note, occupancy at lower-priced properties remain “suppressed” compared to the numbers of the mid-1990s, which results in higher-priced hotels not being able to raise their rates.

According to STR, from 2010 to 2012, higher-priced room rates rose 7.5 percent while lower-priced properties saw only a 3.2 percent increase in ADR.

“Given the strength of the fundamental measures of industry performance and underlying economics, many hoteliers have been disappointed with the pace of ADR growth during the recovery,” Woodworth said. “While we understand the reasons for their concern, further investigation reveals that their worries may be overstated. Measured in real terms, ADR has been growing roughly two percentage points in excess of the pace of inflation in recent years.”

… Adapted by Dave Hogg from a September 04, 2013 HotelNewsNow article by Claudette Covey

This is a direct reprint of a September 5, 2013 article by Francys Vallecillo on the online World Property Channel. I hope you find it to be as informative as I did – Dave Hogg:

A total of 604 hotels changed hands in the U.S. during the first half of the year, compared to 364 in the same period last year, according to a new report from Lodging Econometrics.

Of all transactions, 216 were hotels sold within portfolios, while 334 were individual hotel transactions. The number of hotels in portfolios sold year-to-date was 400 percent higher than the same period of 2012.

Although more hotel transactions were reported, the volume is far from the record 3,218 hotels set in 2007, the firm stated. But the firm expects a sharp increase in hotel deals.

“Depending on scheduling, the next 12 months could be the highest hotel transaction property transfer period recorded, possibly exceeding the peak set in 2007,” the firm said.

During the first half of 2013, selling prices reached $130,119 per room, 15 percent higher than last year, exceeding the previous record of $118,949 per room set in 2007. (Of the total, 508 hotels out of the 604 transactions reported selling prices.)

The time period from late 2012 to 2014 will represent the end of the first upward leg of the real estate cycle, the firm said.

“It’s characterized by near record low interest rates, increased profitability in hotel operations and strong expectations about future business conditions, all of which provides investors an opportune time to dispose of their assets acquired earlier at recessionary lows,” the firm states in the report. “It’s an attractive time to harvest profits from their real estate appreciation.”

The dollar volume for all transactions reached $8.1 billion during the first half, representing the highest two-quarter activity level since 2007.

Institutional investors, private equity funds and REITs are looking to purchase assets for appreciation opportunity promised in the second leg of the real estate cycle, LE stated. The report also highlighted the high IPO issuance during the first half, reaching its highest level since 2007.