Monthly Archives: July 2014

Hotel Prices Soar as Institutions Vie for Assets

Adapted by Dave Hogg From a July 28, 2014 article by Paul Bubny on GlobeSt.com

Strong competition among large-scale buyers has helped fuel double-digit increases in per-room selling prices for hotels. Lodging Econometrics reported last week that average selling price per room soared 28% year-over-year to $150,223 per room in the first half of 2014, compared to $117,300/room in 1H 13. Prices for the first half of this year were also up 17% over the year-end average of $128,352 for ‘13.

“A complete economic recovery, a forecast for continued steady economic growth, receptive capital markets and a docile pipeline make it an interesting time for investors,” according to Portmouth, NH-based LE’s mid-year forecast. “Based on the makeup of their portfolios, it could be an ideal time to be both a seller of hotels, or conversely, an acquirer of additional assets. It could also be opportune to be a holder of existing assets seeking additional operating improvement and asset appreciation too.”

Competition is especially strong for higher-end assets,, as REITs and private equity groups with similar investment objectives vie for larger properties in the CBDs of major cities. The competition has been similar for hotels in the top resort destinations, which have been a little slower to recover. “As a result, these assets still have considerable earnings and appreciation potential ahead,” according to LE..

LE reports that, proportionately, sales of hotels larger than 200 keys have more than doubled Y-O-Y. “Transfers in the luxury, upper upscale and upscale chain scales are up 57% and hotels in CBDs and resort locations are up 39%,” the reports tates. “It’s a major shift towards institutional type quality assets.” Selling prices are at record highs for luxury, upscale, upper midscale and midscale sectors and at CBD, airport and major suburban locations.

The three highest priced markets for the year’s first half were New York City at $619,154 per key, San Francisco at $383,924 and Miami at $363,294. LE cautions that although this metric provides a useful guideline, “sample sizes are small and valuations are always hotel- and location-specific.”

In a report last week from MLV & Co., Ryan Meliker, managing director, equity research, REITS & lodging, offered some metrics indicating that while pricing in institutional-quality CBD assets is making the biggest gains, the suburbs are seeing faster growth in revenues. Urban RevPAR rose 6.6% in the second quarter, while suburban was up 8.8% in Q2, compared to Q1 results of up 5.3% and 8.1%, respectively. “We estimate the top markets in Q2 were Nashville (+19%), Tampa (+17%), Boston (+13%) and San Diego (+13%),” Meliker wrote.

For the majority of lodging companies which MLV covers, Q2 RevPAR tracked ahead of management’s guidance, “with several companies exceeding these ranges,” Meliker wrote. Marriott International appears to have fared best in this regard, tracking 25 basis points above MLV’s estimates, while Sunstone Hotel Investors topped the research firm’s estimates by 140 bps.

According to Fitch Ratings, RevPAR performance for US hotels accelerated during Q2, outpacing forecast estimates by a strong margin. “STR Global’s weekly RevPAR data indicates RevPAR gains of approximately 7.5% through June 28, compared with Fitch’s initial 2014 forecast of 5.5% assigned late last year,” according to Fitch.

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Another Hotel, Another Award

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It’s a habit of ours at Springwood. Our associates like winning awards, and so do we! Our team was recently honored with Marriott’s “Winner’s Circle” award for the single best opening of a Fairfield Inn & Suites hotel. In the entire chain. Given that this is our first Marriott product, we’re really pleased about that.

But the awards don’t stop there. Our Hampton Inn & Suites York, PA South reached the #1 spot of ALL York, PA hotels on Tripadvisor.com only three months after it opened. That’s unheard-of. And in this case, it was even harder to accomplish than normal. You see, it had to displace the reigning king of the local Tripadvisor ratings – a hotel that had dominated the ratings for years – our very own Homewood Suites by Hilton, York.

Keep your dial tuned to Springwood Hospitality, and we’ll let you know which award comes next. I’m thinking an ABC Outstanding Project Award for our historic (it’s never been done before) conversion of a Country Inn & Suites to a Hampton Inn & Suites, in Hershey, PA. Stay tuned…

All the best to you!

Dave Hogg

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