Hospitality Design - December 2011 - 89

forecast
By Stacy Shoemaker Rauen

gotta wear shades
The hospitality market might not be back to where it was in the heydey of 2007-2008 (but then again should or will it ever be?), yet ﬁnally there seems to be some sort of a consensus amidst these trying economic times: relatively speaking, things are looking up.

Back in the USA
“In the U.S., we’ve had our ﬁrst pipeline increase since second quarter of ’08,” says Bruce Ford, senior VP of Lodging Econometrics. “It’s modest, a few thousand rooms, about two percent, but what happened was there were fewer cancellations and openings than there were new project announcements. Simply put, 40,000 new rooms into the pipeline this quarter is an aggressive move in growing the pipeline again. They are larger projects, about 220 rooms, more upscale and upper upscale, more luxury. It takes 18 months to plan these hotels, which brings us to the end of 2012/beginning of 2013, where many feel we will have lending [for new construction] available. What it does is signal a change, that the getting ready to get ready group is getting ready. When the lending light comes on, it will be an aggressive race to the starting line.” Other positive numbers? Ford says there were almost 10,000 room starts in third quarter, sales comps increased 35 percent year-over-year, and we have had 20 months of operating performance improvement. “The operating improvement means that banks are starting to get interested in the hospitality industry again,” says Ford. “Transaction volume is happening, and as soon as a hotel sells, it’s a completely recapitalized asset that presents a tremendous amount of opportunity. It is at least 50 percent of the story in the lodging industry right now.” Plus he and others say it’s easier to get ﬁnancing to buy a hotel than to build a new one. “There is a lot of buying and selling of our branded hotels and that should continue for a number of years as owners get ready for the next cycle,” adds Dexter Wood, senior vice president, global business and investment analysis, Hilton Worldwide. “When a hotel sells it is subject to a PIP. So lots of the renovation is fueled by COO PIPs.” Ford says that the U.S. is beginning to see an increase in new project announcements again, as a direct result of Wall Street capital coming in, and as result of the brands recycling some of the properties and locations that didn’t get built. Another story: There’s plenty of pent up renovation demand as transacted this year. Not surprisingly, the shining star in the U.S. is New York. “It’s is on its own island, literally. It outperforms far and away,” says Ford. New York has had an average 4.5 percent supply growth each of the last four years; it is accelerating in terms of occupancy, rate, RevPAR; and it has twice as many rooms under construction than any other place in the U.S., at almost 6,000. But what many may not realize is its impact on the overall U.S. industry. “The industry forecast might see three to four percent RevPAR growth next year,” says Ford. “But if New York continues its outrageous demand growth, we may see six to seven percent RevPAR growth. It is a swing state.” Not only is there growth in construction, but also in performance. According to STR, the U.S. hotel industry is expected to end 2011 with a 4.0 percent occupancy increase to 59.9 percent, a 3.6 percent increase in ADR to $101.58, and a 7.7 percent increase in RevPAR to $60.81. Supply in 2011 is forecasted to rise slightly (0.7 percent) and demand is expected to end the year with a 4.7 percent increase. And STR forecasts that the good news will continue into 2012 with a 0.2 percent increase in occupancy to 60 percent; a 3.7 percent jump in average daily rate to $105.29, and a 3.9 percent rise in RevPAR to $63.18. STR also predicts that the year-over-year demand will increase many hotels were cash poor the last few years, and now “brands are beginning to force the hand of owners to do the renovations,” Ford says, noting that there were 51,599 rooms currently announced and under renovation construction in the third quarter, 51,402 rooms going through conversions, and 130,724 rooms

The lobby of the Conrad Sanya Haitang Bay.

The Hilton Guangzhou Tianhe.

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December 2011

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Table of Contents for the Digital Edition of Hospitality Design - December 2011