News for the Hospitality Executive |
Hotel Performance, Transactions, and
Values:
Recap of News from the
25th Annual Hunter Hotel Conference
by Jennifer Pope April 2013 From March 20th to 22nd, more
than 1,000 hotel stakeholders
met at the Atlanta Marriott Marquis for the 25th annual Hunter Hotel
Conference, boosting attendance to the highest in the conference’s
history.
Among the topics that drew this record crowd were the impacts of the
recent
economic downturn, the rise in energy prices and interest rates, and
pending
government mandates on hotel values, transactions, and performance
nationwide.
Hotel
Performance, Supply, and Transactions Mike Brophy,
HVS Senior Vice President, served on a panel
for the American Hotel & Lodging Association and delivered a
presentation
on the recent history of and forecasts for hotel performance across the
nation.
“Overall, the U.S. hotel industry is barreling through a recovery,”
said Brophy.
“Greater demand has led to rising rates, which have pushed RevPAR to
new highs.
In fact, the first two months of 2013 realized the highest increase in
rooms
revenue in recent history.” Increasing rates will be fundamental to the
continued recovery of hotel revenues and values in 2013. Sequestration
could negatively affect markets that depend
heavily on government demand. This includes military markets where new
supply
has been proposed, such as Columbus, Georgia and Fayetteville, North
Carolina.
The rising costs of energy and the impending impacts of the Affordable
Care Act
on hotel revenues also remain to be seen, but were certainly weighing
on the
minds of brand managers and property owners. Transaction
levels continue to shift as more and more owners
seek alternatives to putting their properties up for sale. LaQuinta
provides a
ringing example of the hesitancy of owners to let go of their hotels
given the
substantial rise in RevPAR; of the 47 assets the brand had on the
market, all
but one were pulled back. As values and RevPAR rise, more owners may
follow
suit. Nevertheless, the economic recovery is driving demand for hotel
assets.
HVS expects transactions in 2013 to exceed those realized in 2012; next
year’s
levels should go higher still, with lending parameters remaining
favorable and
more investors gaining confidence in the market for hotels. “Based on our
discussions with hotel investors, lenders, and
brokers, as well as recent trends in occupancy, average rate, and
RevPAR, we
anticipate a strong recovery of NOI,” said Brophy. “Lodging REITs have
scaled
back their acquisition activity, which should open up the market to
investors
that had recently been priced out. Once market stability and consistent
macroeconomic growth become more firmly rooted and widespread, the U.S.
lodging
industry should regain virtually every bit of ground lost in the
recession
years.”
Hotel Values Tanya Pierson,
Managing Director of HVS Minneapolis, spoke
at “Hotel Values in a Challenging Market,” which attracted more
attendees than
any other panel at the conference. Many were concerned about the rise
in
interest rates and the resulting impact on hotel values. “Rising
interest rates
are very likely to push hotel values down,” said Pierson, noting that
interest
rates are one aspect of a “forward-looking” assessment of a hotel’s
value. “We
analyze a hotel’s historical performance but also factor in future
events like
the arrival of new supply, rate growth, and demand generation. This
gives a
picture of a stabilized operation three to five years down the road,
and thus a
reliable basis for whether an owner or investor should buy, sell, or
hold.” The latter
decision relies heavily on market conditions, as
well as the intentions of an individual owner. A long-term hold might
make more
sense to refinance today by taking advantage of low interest rates. On
the
other hand, owners looking to unload an asset in the short term have a
very
large pool of potential buyers, making the prospect of selling now more
attractive. “Buyers are very active with interest rates so low,” said
Pierson,
“and there is still upside potential, particularly in terms of average
rate
growth, for income to improve above inflationary levels.” U.S. hotel
values peaked in 2006 at $100,000 per room. The
low point during the recent downturn occurred in 2009, with values
dropping to
$56,000 per room. HVS projects that U.S. hotel value growth will
persist
through 2016, surpassing the peak registered in 2006 by year-end 2013. Conclusion A good deal of
wariness remains on the minds of hoteliers in
2013. Still, optimism reigned at the conference, fueled by the rise in
average
room rates and the resulting growth of RevPAR. This was especially true
among
upscale and luxury hotels, where overall RevPAR growth has been in the
double
digits—a remarkable change from the situation from 2008 and 2009 when
full-service hotels in destination cities across the country were
losing so
much business from corporate and government travelers and groups. The
upward
trend for average rates has spread from primary to secondary to
tertiary
markets, despite the debt crisis and other lingering economic woes, and
with so
little supply in the pipeline, occupancy is expected to exceed its
former
recent peak. This bodes well for hoteliers, even as some government
policies
threaten to affect revenues and rising interest rates take their toll. ____________________________ About Jennifer Pope As Marketing Coordinator,
Jennifer Pope helps get the word
out about how HVS can help clients achieve their goals in the hotel
industry.
Jennifer manages the public relations arm of HVS’ consulting and
valuation
offices in Atlanta, Columbus, Dallas, Denver, Houston, Minneapolis,
Philadelphia and St. Louis. She is a facilitator of the U.S. Hotel
Market
Connections and the annual U.S. Hotel Appraisals Hospitality
conference. She
also coordinates conference participation for these offices at
hospitality
events across the country. Contact Jennifer at (972) 899-5700 ext. 3332
or [email protected].
|
Contact:
Jennifer Pope [email protected] (972) 899-5700 ext. 3332 |
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