Headlines – Week of December 25, 2011

January 3, 2012

PKF U.S. Hotel Forecast: Recovery Better For Some, Not All

According to the recently released edition of Hotel Horizons®, PKF Hospitality Research (PKF-HR) forecasts that rooms revenue (RevPAR) for U.S. hotels will rise 8.1 percent in 2011, and increase another 6.1 percent in 2012.

PKF-HR is forecasting the continued recovery of the U.S. lodging industry. How well a hotel does in 2012, however, will vary depending upon the price of the room and where it is located.

Looking forward, PKF-HR sees familiar signs along the road to recovery. Owners and operators are now focused on more aggressive pricing policies, which in turn will translate into strong growth in hotel profits.

Recovery Disparities

PKF-HR is cautioning its clients that the national statistics may, or may not, apply to the type and location of hotels they own or operate. Looking deeper into the data, PKF-HR finds a continued bias favoring the future performance of hotels in the upper-tier segments of the industry.

Hotels operating in the upper-tier (luxury, upper-upscale, upscale) segments are all forecast to achieve occupancies above 70 percent in both 2012 and 2013, which will exceed their long-term average occupancy levels. Conversely, hotels in the lower-priced chain-scales will continue to achieve occupancy levels below their long-term average through 2013.

The unevenness of the recovery is also apparent when analyzing the performance of the 50 markets for which PKF-HR prepares Hotel Horizons® forecast reports. In 41 of the 50 markets, hotels are renting more guest rooms today than they ever have in their history. However, the distribution of demand recovery varies by segment. In 49 of the 50 markets, upper-tier hotels have passed their previous peak levels of accommodated demand, but lower-tier hotels have reached the same milestone in only 16 cities.

The Pricing Challenge

With national occupancy levels approaching their long-term average, and no meaningful new hotel supply additions in the foreseeable future, the pace of ADR growth is forecast to accelerate.  PKF-HR is projecting the ADR for all U.S. hotels to increase 4.7 percent in 2012 and another 5.3 percent in 2013. The long-term annual average for ADR growth is 2.8 percent.

PKF-HR is forecasting U.S. lodging demand to grow 2.0 percent in 2012. This is less than the annual growth rates observed in 2010 (+7.4 percent as reported by Smith Travel Research) and projected for 2011 (+4.8 percent).

Best Places to Invest in Real Estate

Money Magazine released the top cities to be a landlord, based on home prices, projected rent increase, and job growth. The top four cities to make its list are:

1. Houston
Projected rent increase in the next 3 years: 18%
Median home price: $174,000
Average monthly rent: $818

2. Grand Rapids
Projected rent increase in the next 3 years: 15%
Median home price: $128,000
Average monthly rent: $636

3. Rochester, N.Y.
Projected rent increase in the next 3 years: 25%
Median home price: $148,000
Average monthly rent: $785

4. Dallas
Projected rent increase in the next 3 years: 16%
Median home price: $166,000
Average monthly rent: $877

Full Article

 

Cities That Boast the ‘Best Value’

Kiplinger’s Personal Finance magazine recently ranked metro areas by best “value,” factoring in low cost of living, strong economies, and personal amenities.

The following are the six metro areas that topped its list, including each city’s unemployment rate, median household income, and cost-of-living index (the index is based on the national average of 100; cities with a score below 100 have a lower cost-of-living).

1. Omaha, Neb.
Unemployment rate: 4.6%
Cost-of-living index: 90.3
Median household income: $53,457

2. Charlotte, N.C.
Unemployment rate: 10.4%
Cost of living index: 93
Median household income: $53,168

3. Nashville, Tenn.
Unemployment rate: 8.5%
Cost of living index: 90.7
Median household income: $51,352

4. Colorado Springs, Colo.
Unemployment rate: 9.3%
Cost-of-living index: 92.0
Median household income: $56,576

5. Knoxville, Tenn.
Unemployment rate: 7.7%
Cost-of-living index: 89.7
Median household income: $45,727

6. Lexington, Ky.
Unemployment rate: 7.8%
Cost-of-living index: 89.1
Median household income: $48,158

Full Article

Posted by Scott R. Lodde

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