See this article in today’s Hotel News Now online: TRU by Hilton
The headline says it all. Below is a January 30, 2017 article by Brendix Anderson, reprinted from National Real Estate Investor magazine (I added the bolds).
Hotels had another great year in 2016, even though developers keep on opening new properties. For the whole year of 2016, the occupancy rate for hotels averaged 65.5 percent in the U.S., according to hotel data firm STR.
“It’s the highest occupancy rate ever recorded for a year,” says Jan Freitag, senior vice president of lodging insights for STR.
Occupancy rates have kept rising even though hotels face competition both from home-sharing websites like Airbnb and from hotel construction. However, occupancy rates are expected to dip slightly in 2017 and 2018, while demand will help keep room rates rising at a healthy rate.
There are now 183,000 hotel rooms under construction in the U.S., according to STR. That’s up 30 percent from 2015. This year, the inventory of hotel rooms is expected to grow by 2.0 percent. Demand for those hotel rose is expected to be high, but not high enough to keep the occupancy rate from falling on average by 0.5 percent in 2017.
Nevertheless, revenue per available room is expected to rise 2.3 percent in 2017, according to STR. Room rates should also rise 2.8 percent on average.
The danger of overbuilding would be higher if banks were more willing to make construction loans. Some large hotel projects in downtown areas have been delayed because banks are not willing to lend as much.
“The level of new construction is not as high as it would normally be given the occupancy numbers,” says Jeff Myers, managing consultant for CoStar Portfolio Strategy. “The financing is not there.”
“There has truly been a shift in new construction—in what is being built and where it is being built,” says Myers. More than a third of all the new hotel rooms that have opened since the recovery began in 2010 have opened in central business districts (CBDs). Before 2010, the share of all new hotels that opened in downtown areas was closer to one in six, according to CoStar.
“If there is a supply risk, the risk is going to be most pronounced downtown or in downtown submarkets,” says Myers.
PwC predicts a stronger rise in 2017 ADR and RevPAR than its earlier predictions. This revision is based on post-election optimism which they say resulted in a stronger-than-projected 4th quarter for the U.S. hospitality industry.
Below is a reprint of a January 25, 2017 article from the Hotel Management Newsroom that gives the details:
A new forecast released by PwC US found strong industry performance took place during Q4 2016, including positive trends in demand and average daily rate. This was boosted by a post-election surge in consumer and business sentiment resulting in improved economic conditions, which PwC expects to result in continued revenue-per-available-room growth in 2017.
The forecast is calling for increased room supply to marginally outpace growth in demand for this year, resulting in an occupancy decline to 65.3 percent. This will be aided by an expected increase in corporate transient demand and improvements in ADR to drive RevPAR up 2.3 percent.
PwC draws its latest numbers from IHS Markit, which expects real gross domestic product to increase 2.3 percent in 2017 based on a fourth-quarter-over-fourth-quarter measurement. This is roughly 50 basis points higher than a forecast released in November by PwC, and is influenced by improving economic conditions traced to improving business and consumer confidence, positive financial markets and potential policy decisions focused on tax cuts and altered trade regulations.
“Based on a strong fourth quarter, we are encouraged by the trends we are seeing as we head into 2017,” Scott D. Berman, principal and U.S. industry leader, hospitality & leisure, PwC, said in the report. “However, we remain cautiously optimistic, as higher-than-previously anticipated increase in demand is still expected to be offset by increasing supply through the year.”
The updated estimates from PwC are based on a quarterly econometric analysis of the U.S. lodging sector, using an updated forecast released by IHS Markit and historical statistics supplied by STR and other data providers.
Multi-Brand Developer of the Year: Springwood Hospitality
Congratulations to the team at Springwood Hospitality on winning the 2015 Multi-Brand Developer of the Year Award for a truly impressive list of properties:
- Home2 Suites by Hilton Lancaster
- Home2 Suites by Hilton York
- Home2 Suites by Hilton Harrisburg
- Home2 Suites by Hilton Frederick
- Tru by Hilton Lancaster
- Tru by Hilton York
- Hampton Inn & Suites by Hilton York
- Hampton Inn & Suites by Hilton Hershey
- Homewood Suites by Hilton Frederick
- Homewood Suites by Hilton York
Springwood Hospitality is a valued partner and has demonstrated a passionate commitment to Hilton brands — enjoying success thanks to their “Springwood Essentials.” David tells us the first rule of thumb is, “Do what is fair and right – always.” Springwood seeks to improve the quality of life in the communities they serve. They attract successful neighbors and new job opportunities, partner with local not-for-profit organizations and deliver consistently superior performances, making them the perfect choice for Developer of the Year.
David says he learned an important lesson years ago, when he owned other brands and realized that Hampton by Hilton outperformed his best brand by 25%. He sold the others and is now starting construction on his fourth Hilton product in that market. “Hilton’s development of the Home2 and Tru brands has enabled us to grow rapidly. Our Hilton products don’t cannibalize one another, and we have become a force in the local hotel market. Today all of our under-construction and in-the-pipeline hotels are either Home2 or Tru. That won’t always be the case, but we are thankful that Hilton’s cutting-edge brand development has enabled us to profitably and aggressively grow a small hotel company,” he says.
Springwood Hospitality DNA
David and his team pride themselves on Springwood Hospitality’s hard-earned reputation. “Over the years we have been candid about our business, even when the news was unpleasant; folks have learned that when we tell them something, they can take it to the bank. If we miss a development deadline or we fall short of a sales projection, we tell the truth and explain the steps we’re taking to fix it. We give proper credit when things go really well. In time, people have learned that’s just our DNA. Today it’s much easier to get a necessary contract extension or extra attention from a local municipality, because folks don’t waste energy questioning our motives,” he says.
They’re just as meticulous about where they choose to develop. “We focus within a three-hour drive of our office, so we can make a meaningful visit to any hotel and still be home for (a late) dinner. Within that geography, we seek underserved submarkets with high barriers to entry. Our most successful hotels are in markets where it took five or more years to find our first site,” he adds.
David feels the hotel business is for those who pursue it full-time so they can push the envelope on technology, sales, service, revenue management, and brands. “That’s where the profit is. We recently exited three other industries to devote 100% of our energy to what we do best: develop and manage hotels with excellence!”
He has sound advice to offer others seeking to emulate Springwood Hospitality’s success. “Partner with the best brand; get the best broker, engineer, architect and general contractor you can find. When the chemistry is right and you understand each other’s expectations, you’ve assembled a team that can accomplish amazing things. Hotel development requires putting a band together; you’re never playing solo. When every musician is up to the task, the sound is awesome.”
- Reprinted from “Hilton New & Now” franchisee update newsletter 12-19-2016
Extended-stay hotels continue to remain popular among travelers needing more time and perhaps a little more room. Please see the article in HotelNews.com to read more.
This nationally prominent research is compiled by the Highland Group, a highly reputable consulting firm in the Atlanta area. Springwood uses Highland for substantially all of its market analysis and feasibility studies.
In October 2016, Kyle Henderson of Hilton Worldwide interviewed Dave Hogg, CEO of Springwood Hospitality, to prepare a press release to announce Springwood Hospitality as the Hilton Worldwide Multi-Brand Developer of the Year 2015. Below is a transcript of that interview.
We’re sharing it with you because we think it will give you some insight into Springwood’s DNA. Enjoy the interview!
HILTON: Tell us a little about what factors have contributed to your success and longevity as an owner of Hilton brands.
DAVE: Years ago we operated two lesser brands in a market where there was also a Hampton. All three hotels were similar in design, location, and management. Back then (a decade ago) everybody in that market shared sales information. I’ll never forget studying the data and discovering that RevPAR at our Brand A outperformed our own Brand B by about 25%, and RevPAR at the Hampton outperformed our brand A by another 25%. The difference was the brand. We’ve since sold both of those hotels, and we’re starting construction of our fourth Hilton product in that market. With products ranging from a Homewood to a TRU, our Hilton products don’t cannibalize one another, and we have become a force in the local hotel market.
Hilton’s development of the Home2 and TRU brands has enabled us to grow rapidly. Today all of our under-construction and in-the-pipeline hotels are either Home2 or TRU. That won’t always be the case, but we are thankful that Hilton’s cutting-edge brand development has enabled us to profitably and aggressively grow a small hotel company. Our company would never be where it is today without Hilton’s significant contribution.
HILTON: How do you choose your locations/projects?
DAVE: We focus within a 3-hour drive of our office, so that we can make a meaningful visit to any hotel and still be home for (a late) dinner. Within that geography, we seek underserved submarkets with high barriers to entry. When a broker shows us five, equally-desirable sites in the same market, we run away. All of those sites might hold hotels in just a few years. The market must be underserved to command our time; otherwise, a new hotel will have no reason to exist. Our most successful hotels are in markets where it took five or more years to find our first site.
HILTON: What successful strategies do you feel really make a difference when it comes to developing any property?
DAVE: Partner with the best brand; get the best broker, engineer, architect and general contractor you can find. We have built relationships with firms – like Hilton – who perform, and we keep going back to them for the next project. When the chemistry is right and you understand each other’s expectations, you’ve assembled a team that can accomplish amazing things. Hotel development requires putting a band together; you’re never playing solo. When every musician is up to the task, the sound is awesome.
HILTON: What techniques have you used to overcome any challenges over the years?
DAVE: We operate by what we call the “Springwood Essentials.” The first of these is “Do what is fair and right – always.” Over the years we have been candid about our business, even when the news was unpleasant; folks have learned that when we tell them something, they can take it to the bank. If we miss a development deadline or we fall short of a sales projection, we tell the truth and explain the steps we’re taking to fix it. We do the same and give proper credit when things go really well. In time, people have learned that’s just our DNA. Today it’s become much easier to get a necessary contract extension or some extra attention from a local municipality, because folks don’t waste energy questioning our motives. The only reason we need written contracts is that memories fade, and written agreements remind us what we committed to do.
HILTON: How has Hilton best served you or supported you over the years?
DAVE: Hilton’s development team has always played their cards face-up with us, so we never waste each other’s time. They have also made critical introductions for us that have opened up opportunities that our small company would not otherwise have had. People impute the power of Hilton to us when Hilton’s development team helps us this way. The outside world knows we’re not Hilton, but they also know we carry the banner of the brand.
Operationally, Hilton’s leading-edge technology, and the exceptional Hhonors program and accompanying app, give our Hilton-branded hotels a significant edge in the guest marketplace. The worldwide power of the Hilton brand and its corporate marketing team is remarkable. This power reduces the risk and improves the potential payback for the development of any Hilton-branded product.
HILTON: Is there anything that, in hindsight, you would do differently?
DAVE: I have learned the benefit of partnering with the best. Unfortunately, that insight came decades too late in my career while I chased low price and settled for marginal performance. Today I pursue excellence at a fair price. This principle applies to all Springwood team members and to all outside vendors we bring to the team. We don’t settle. If you’re writing and producing the play, then make it a work of art you love; only the best performances sell out in advance at premium prices.
HILTON: What else have you learned that you would most like to share with your peers?
DAVE: The hotel business is for those who pursue it full-time so they can push the envelope on technology, sales, service, revenue management, and brands. That’s where the profit is. The same can be said of the retail or multifamily management businesses, and the real estate brokerage business. We recently exited all three of those industries to devote 100% of our energy to what we do best: develop and manage hotels with excellence!
See who all of the 2016 award winners are in the CPBJ press release HERE.