Headlines – Week of September 9, 2012

September 20, 2012

Moderate Hotel Growth Underway

According to a new report from Lodging Econometrics (LE), moderate growth in U.S. hotel pipeline metrics has been underway for a while.

In Q2 2012, hotels under construction stood at 525 projects/66,917 rooms. LE said room counts are up from the bottom of 387 projects/49,028 rooms for the fourth consecutive quarter, signaling that the industry has entered the early stages of a new real estate growth cycle.

The annualized four-quarter trend line for construction starts is up from the bottom for the sixth consecutive quarter and is at its highest level in 10 quarters. LE suggests the uptick in construction starts is due largely to the commencement of previously stalled projects in the pipeline while developers were awaiting evidence of a sustained operating recovery.

The most significant indicator of future pipeline growth is new project announcements. At 1,180 projects/147,447 rooms, the annualized four-quarter trend line is up from the previous cyclical bottom for the third consecutive quarter and is at the highest level in six quarters.

Based on current construction trends, these pipeline metrics support LE’s initial forecast for new hotel openings in 2014 of 446 projects/48,335 rooms. This is a 31% room count increase and the first substantial upturn from the bottom of 346 projects/37,200 rooms set in 2011.

While the recovery in the U.S. lodging industry has been slower than hoped for, LE expects that both ADR and RevPAR will exceed previous cycle highs in 2013.

The firm’s expects that once the election season is over, the administration will be able to build a bi-partisan political consensus to ensure that job growth policies are at the top of the nation’s agenda.

We all know that job growth is the key to improving consumer spending, which is necessary to trigger investment by the business community. That environment will spur lodging demand and move hotel development at a faster pace.

 

RevPAR forecasts up for remainder of 2012

PKF Hospitality Research, PwC and STR all recently revised their 2012 RevPAR forecasts up for the remainder of the year compared to their mid-year forecasts.

Average daily rate has been the driver behind growing revenue per available room for the last few quarters.

New data from STR and TravelClick projects RevPAR, ADR and occupancy gains for U.S. hotels over the remainder of 2012.

For 2012, STR projects a 2.1% increase in occupancy to 61.2%, an ADR gain of 4.4% to US$106.15 and a RevPAR increase of 6.5% to US$65.01.

Supply and demand are expected to end the year with increases of 0.5% and 2.6%, respectively.

TravelClick data shows committed occupancy for August to December this year is up 5.4% and ADR is up 5%, with the growth driven by the transient segment with an occupancy increase of 5.6% and an ADR increase of 5.5% in comparison to the same time last year

In 2013, STR predicts occupancy to be virtually flat with a 0.3% increase to 61.4 percent, ADR to rise 4.6 percent to US$111.01 and RevPAR to grow 4.9% to US$68.17. Supply and demand are forecast to end 2013 with increases of 0.9% and 1.2%, respectively.

 

Hotel Real Estate Boom on Miami Beach

According to a recent article in Herald Online as well as my personal observations, there’s a major real estate boom going on in Miami Beach in small to mid-size luxury hotels that are being bought, sold, managed and renovated.

According the article, in just the last few months the following activity:

  • $85 million SLS South Beach Hotel on Collins Avenue
  • Royal Palm Hotel was sold for $130 million and is being rebranded as the James Hotel
  • Gansevoort hotel was sold and renamed The Perry and is being managed by Starwood
  • Kimpton signed a contract to manage the Surfcomber Hotel which sits at a prime location at 17th and Collins Avenue
  • The Delano hotel is for sale (although its owners still want to manage it after the sale)
  • David Edelstein, the owner of the W South Beach purchased the Raleigh hotel for $55 million

According to experts in the market, this recent activity is and indicator of the strength and demand of Miami as a destination.

Other factors contributing to the demand includes:

  1. The areas consistent placement in the top ten of varied Best Of lists,
  2. The continued allure in a competitive vacation market
  3. Ongoing infrastructure updates
  4. Sophisticated cultural, gastronomic and social options and
  5. Great weather

Renovation projects currently underway include:

  • B Hotel (the former Continental)
  • Saxony hotel
  • The historic beachfront Seville Hotel (to be branded a Marriot Editions)
  • A number of properties are also actively courting buyers – if the price is right.
  • Other luxury properties which have opened in recent years include:
  • SLS South Beach
  • Mondrian
  • W
  • Standard
  • Setai

Other properties getting significant renovation include:

  • The Betsy
  • Surfcomber
  • Fontainebleau
  • Loews

Posted by Scott R. Lodde

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