Monthly Archives: August 2015

(Excerpted from an August 20, 2015 article in HNN Newswire.  Emphasis added by me.)

The U.S. hotel industry reported positive results in the three key performance metrics during July 2015, according to data from STR, Inc.

In year-over-year results, the U.S. hotel industry’s occupancy was up 2.3% to 75.3%; its ADR rose 5.9% to $124.32; and its RevPAR increased 8.3% to $93.61.

In year-over-year results, the U.S. hotel industry’s occupancy was up 2.3% to 75.3%; its average daily rate rose 5.9% to $124.32; and its revenue per available room increased 8.3% to $93.61.

“The July occupancy of 75.3% was the highest single occupancy of any month ever recorded by STR,” said Jan Freitag, STR’s senior VP for lodging insights. “Hand in hand with this goes the demand of more than 116.8 million roomnights sold, which is 4 million roomnights higher than last July and another all-time record for any month. This translates to a demand increase of 3.5%, which is a continued healthy clip and actually higher than it was in June (+3.2%).”

RevPAR in the U.S. has increased for 65 consecutive months. ADR has risen year-over-year at 5.0% or higher for three straight months and four of the first seven months of 2015.

In July, every Top 25 Market reported year-over-year growth in RevPAR and ADR.

– See more at: http://www.hotelnewsnow.com/Article/16508/STR-US-hotel-performance-for-July-2015#sthash.jYBb8ndG.dpuf   (copy and paste link)

Note:  STR Global is the industry standard for measuring operating results across the industry, and it has been since I entered the industry.  I’m not sure how long they’ve been measuring, but it encompasses the entire modern hotel era.  To me, that’s forever.  Dave Hogg

Hotel room demand is strong and rising, and non-hotel competitors are not eroding demand from the all-important business traveler. Below are a few confirming excerpts from a recent article by Nancy Marshall-Genzer in NPR’s Marketplace (August 18, 2015):

Life is sweet if you’re a hotel chain right now. While there’s a shortage of hotel rooms in the U.S., demand is up, so hotels can charge more. The shortage is a leftover from the recession, when hotel construction plummeted. It’s still not up to pre-recession levels.

But won’t demand for hotel rooms fall because of competition from upstarts like the sharing service Airbnb? Not according to Smedes Rose, a senior analyst at Citigroup. He says the all-important business traveler is sticking with hotels.

“They’re not really flocking to Airbnb,” he says. “Partly because there’s a convenience factor for hotels. There’s probably a liability factor — travel policies that companies have in place.”

Hotels are also diversifying, with different brands catering to specific travelers. Surprise, surprise! The latest trend is hotels for millennials.

Those feature “larger square footage for the lobby and the bar area,” says Lauro Ferroni, head of hotel research at JLL, a commercial real estate service firm. “Of course, everything is wired.”

Millennials are spending a lot more on travel these days, and chains like the new Home2 Suites by Hilton are positioned to take full advantage of the trend. See the excerpts below from a recent article in Travel Weekly, a travel industry resource. (Comments below, and graphic above, excerpted from a Travel Weekly article by Jeri Clausing, August 17, 2015.)

Steve Cohen, vice president of insights for MMGY, said the marketing firm’s 2105 Portrait of American Travelers found that millennials and Gen-Xers reported they planned to spend 10% more on travel this year, compared with boomers and matures, who planned to spend 1% more.

“Millennials continue to lead the resurgence in travel,” Cohen said. “They’re the ones who would rather spend their money on experiences than stuff.”

They are also the ones who most often said luxury travel is a deserved reward for hard work, he said. Forty-nine percent of millennials said that, compared with 39% of Gen-Xers, 38% of baby boomers and 35% of matures.

August 10, 2015 By Sean McCracken, Reporter, Hotelnewsnow.com

NASHVILLE, Tennessee—One of the anomalies of the current demand boom in the U.S. hotel industry has been a relatively slow growth in supply to go with record-high levels of occupancy.

But with 128,734 rooms in construction as of June and 426,043 under contract, that looks to be changing in the near future.

A group of three active hotel developers spoke during the Hotel Data Conference on the panel “The growing pace of development and renovations,” saying there are both benefits and challenges to building and renovating during the up cycle.

The panelists agreed that now is a good time to build hotels, even if some worry the industry is past the peak of the good times.

“I think we still have some time” in this cycle, said Mary Beth Cutshall, senior VP of acquisitions and business development at Atlanta-based Hospitality Ventures Management Group. “We’re in a really good place. … I think we’ll have a fairly decent run for a bit.”

Tim Osiecki, president of architecture and construction at Concord Hospitality in Raleigh, North Carolina, has a similarly optimistic view on new development, especially if you can identify good markets.

“You’ve got to be cautious in those gateway cities—the Denvers and Miamis—that have seen enormous construction cost increases,” Osiecki said. “You don’t want to be the guy who built the last hotel before it changed. It’s not fun. But in markets like Pittsburgh, where we’ve developed 16 hotels, it’s been very steady without super highs or super lows.”

The challenge of construction demand
The recovery of the greater economy has paved way for a comeback in construction demand, which has led to higher material costs and a shortage of skilled labor needed to make development plans a reality, panelists said.

“Everyone is busy, and not just in lodging but real estate in general,” said Scott Peterson, senior director of development for the CSM Corporation in Minneapolis. “So finding that skilled labor is the most challenging. We’re having trouble finding masons, which is a pretty easy, bulk subcontractor base you can find in any market.”

Osiecki said you can still turn projects around on a relatively quick timeline if needed, but it comes at a price.

“We have a 258-room Hyatt House under construction,” he said. “It’s an adaptive-reuse project in downtown Jersey City. It’s a $92-million project, and we actually made the conscious decision to spend an addition $5 million to do it completely union. And that’s just because there’s a workforce pool there that we think is going to get us to completion at least six to eight months sooner.”

Deno Yiankes, president and CEO of investments and development at White Lodging in Merrillville, Indiana, said he has spoken to contractors who are booked for the next three years. That might push some developers into tertiary markets with less demand on contractors, but Yiankes said there’s a payoff for dealing with that headache.

“The pricing and difficulties of labor are correlated to the strength of some of these markets,” Yiankes said. “If you’re trying to do something (in a high-demand market) you can’t have those great market conditions you love without the same conditions on the construction and trade side. It fits hand in hand. But that’s a one-time deal, and once you’re done (with construction) you get to enjoy the strength of that market.”

Dealing with the renovation cycle
A lot of the same pressures that can weigh down a new development also apply to renovation projects, which puts a premium on knowing how to manage property improvement plans handed down by brands, according to the panelists.

Yiankes said it’s important to develop good relationships with brands and to be proactive to keep renovation costs down.

“If you have that relationship, it’s always better to lead with telling them what you want to do rather than asking them what they want you to do,” Yiankes said. “If you come in with a plan and it’s well thought out … there’s a lot less heartburn then going in and saying, ‘Hey what do you think?’ That opens up Pandora’s Box.”

Cutshall said it’s also important to carefully examine possible renovation needs at newly acquired properties, because otherwise that also can lead to large and unexpected costs.

“One of the biggest mistakes buyers make is underestimating capital needs,” she said. “You have to err on the side of conservative when you’re underwriting that.”