STATE COLLEGE, Pennsylvania — Hotel values are set to increase through at least 2014, led by particularly strong gains in the economy segment, according to the latest Penn State Index of U.S. Hotel Values.
Hotel values are projected to increase 8.8% during 2013, equating to a per-key value of $106,957. During 2014, values are projected to increase 6.9% to a per-key value of $114,334, according to the index.
“Hotels continue to be a preferred investment during uncertain economic times. U.S. gross-domestic-product growth is expected to continue, but not at inspiring levels. Long-term interest rates are anticipated to remain fairly low. Unemployment is expected to continue to hover in the 7% range, keeping consumer spending relatively strong,” said John O’Neill, director of Penn State University’s School of Hospitality Management and creator of the index.
“Occupancy levels will be at or near their historical peak. Average daily rates are expected to register moderate gains. Construction activity is expected to remain moderate, or at least well below historical averages. Commercial and leisure transient hotel room demand is expected to stay pretty strong, whereas group demand is a bit dicey.
“Average U.S. hotels are expected to remain profitable in the near term,” he said.
NOTE: This article is largely reprinted from a recent article by Patrick Maycock, Editor-in-Chief, HotelNewsNow.com. I thought my readers would learn from it.
According to a recent study conducted by the National Business Travel Association and reported by Bloomberg, business travel spending should grow 5% in 2011. They credit both a growing economy and stronger corporate profits.
Business travel in 2010 grew 2.3% in 2010 according to NBTA estimates. We saw this impact anecdotally in our hotels that cater to business travelers, who started showing up again in stronger numbers in 2010. This factor helped fuel the nearly 16% revenue increase in 2010 at our Homewood Suites by Hilton (a great brand, by the way).
NTBA points out that international business travel rose a whopping 16.9% in 2010, fueled by export-driven commerce. That’s a huge gain, and it is an actual benefit of the weaker dollar. Let’s hope that the federal government someday sees the wisdom of promoting this valuable export as a way to grow the economy and ease our trade deficit.
I predict that NTBA is right about the coming 2011 increase in business travel. As its spokesman said in the article, “Companies are once again recognizing the value of face-to-face meetings … to build relationships.”
At Springwood, we build our business on relationships, because we believe that relationships drive not just our business, but all business. There is no better way to build them than face-to-face!