NEW YORK (Dec. 4, 2013) ─ Attendees at the recent North America Hotel Investment Conference (NATHIC) in Chicago were encouraged to hear optimistic predictions by some of the industry's most influential leaders and investment professionals who said the transactions market is heating up thanks to more available assets, willing lenders and potential buyers.
NATHIC, part of Questex Hospitality + Travel's International Hotel Investment Forum (IHIF) Summit Series, focused on hotel development, ownership and management in North America. Now in its fifth year, the Nov. 20-22 event at the Hyatt Chicago Magnificent Mile attracted 300 hotel owners, developers, operators, lenders, consultants and brand executives.
Marilyn McHugh, who oversees NATHIC as vice president of global events for Questex Hospitality + Travel, said this year's event benefited by moving from Washington to Chicago. "The industry rallied behind our decision, which restores an important forum for investment discussion in the Midwest," she said.
A state-of-the-industry panel kicked off the conference with leading hotel company executives discussing rate strategy, development opportunities and online distribution channels, among other topics. Panelists included Dave Johnson, Aimbridge Hospitality president and CEO; David Kong, Best Western International president and CEO; Steve Miller, Wyndham Hotel Group senior vice president of development; and Chip Ohlsson, Starwood Hotels & Resorts Worldwide vice president of development.
The group agreed the industry should strive to set average daily rates higher commensurate with increasing demand. "There is unconstrained demand in many markets, so it's all about how can we push rate," said Johnson.
Regarding development, the panelists observed that an increasing number of hotels are being constructed as financing becomes more available for new-build projects. Ohlsson said more than 80 percent of Starwood's pipeline is new construction. "We are now looking at bigger projects," he said. "Money and financing are jumping back in."
Jan Freitag, Smith Travel Research senior vice president, presented "Five Things to Know in November:" 1) lodging stocks are performing well, 2) real estate transaction volume is heating up, 3) average daily rate continues to gain, 4) markets continue to show "uneven results" and 5) the industry forecast is "sunny."
Among the lodging stocks that have enjoyed a good run in 2013, he cited Choice Hotels International, Strategic Hotels and Resorts, Starwood Hotels & Resorts Worldwide, Pebblebrook Hotel Trust, DiamondRock Hospitality, Sunstone Hotel Investors, LaSalle Hotel Properties, Hospitality Properties Trust, Host Hotels & Resorts and InterContinental Hotels Group.
Hotel transactions volume likely will top $18 million by the end of year, up significantly from the $13 million recorded in 2012 but less than the $19 million in 2011, he said. However, the average development price per room is expected to reach an all-time high of $196,000, up from $183,000 in 2012 and easily topping the previous record of $189,000 set in 2011.
Despite an all-time-record supply of 1.5 billion rooms compared with demand of 950 million rooms, the hotel industry achieved its highest-ever average revenue per available room during October at $71, which was based on average occupancy of 64 percent and average daily rate of $111. Industrywide rooms revenue totaled $105 billion.
Freitag predicted occupancy will continue to slow while average daily rate will grow steadily, resulting in positive RevPAR growth "for the foreseeable future." Occupancy growth is attributed to transient stays. Groups, on the other hand, showed growth in just one segment – luxury – while declining 1.9 percent in upper-upscale hotels and 3.7 percent in upper-tier independent hotels year to date ending in October.
J.P. Ford, Lodging Econometrics senior vice president, reported that hotel development is increasing steadily with a total of 390,000 rooms in the pipeline by the end of 2013 including hotels under construction, projects within 12 months of construction and those in early planning. Projections show that number will increase to 450,000 by year-end 2014 and 525,000 by year-end 2015, approaching the prior peak of 785,000 rooms in the pipeline during the second quarter of 2008, just as the nation slid into an economic recession.
Ford predicted new construction will be active but projects will be smaller, clustered in the upscale and upper-upscale segments. The highest-rate markets and gateway cities continue to draw "eager developers looking for land or adaptive reuse projects," he said. He ranked New York, Washington, Los Angeles, Houston and Chicago as the top cities for room growth and new hotel openings, followed by Miami, San Diego, Seattle, Boston and Dallas.
Among other predictions, Ford said the market will "continue to remain robust in several areas, including transactions," debt availability will continue to improve and profits will continue to rise, although reinvestment will be needed to sustain that growth.
NATHIC featured its first "hotel shark tank" competition based on the popular reality television show. Hospitality students from Michigan State University, New York University and DePaul University pitched new hotel brand concepts to lodging industry executives. Michigan State University took top honors for proposing a boutique hotel brand called Exposure that targets secondary and tertiary markets.
The event also debuted its Hospitality Real Estate Showcase with top brokers promoting property listings currently on the market. The panel included leaders from Hospitality Real Estate Counselors (HREC), Hotel AG, Marcus & Millichap and Paramount Lodging Advisors.
Other conference highlights include views on structuring third-party management agreements; the benefits of public versus private lending; insider tips on managing through a renovation; an in-depth review of the transactions market and where opportunities lie; insights on repositioning an asset for maximum success; an open discussion by the Lodging Industry Investment Council (LIIC), a prestigious think tank of hotel owners, brokers, financiers and lawyers led by HREC founder Mike Cahill; a review of the top development and franchising possibilities in Canada; a look into future trends by a panel of younger-generation hoteliers; a discussion about social media and digital marketing and an analysis of the food and beverage revolution.
For more information on the North America Hotel Investment Conference, visit www.nathic.com. For IHIF events, visit www.ihif.com.
The Questex Travel Group, a division of Questex Hospitality + Travel, serves travel marketers globally through its TravelAgentCentral.com, LuxuryTravelAdvisor.com and TravelAgentUniversity online portals. It operates the leading luxury travel booking site, FiveStarAlliance.com, publishes Travel Agent and Luxury Travel Advisor magazines and produces leisure events: Luxury Travel Exchange International, ULTRA Luxury Exchange, Young Leaders Conference and Hawaii Travel Exchange and MICE events: Global Meeting & Incentive Travel Exchanges and CONFEC conferences.
Questex Hospitality + Travel also provides business development, marketing and training services to national tourism organizations, destination marketing associations, hotel, gaming, resort and cruise companies, online travel agencies and travel advisors worldwide. Questex Hospitality + Travel is a division of Questex Media Group LLC, headquartered in Newton, Mass., with offices throughout the world.
