Reports

U.S. Hotels See Enthusiasm Amid Headwinds in Q2

Although the eight-year bull market in the US lodging industry is showing signs of deceleration, the sector posted record performance metrics on a national level during 2016 including: 65.5 percent occupancy, $124 average daily rate, $81 revenue per available room, 1.8 billion available room nights, 1.2 billion occupied room nights, and $149 billion in rooms revenue. Q1 2017 compared with Q1 2016 indicates a continued increase in every major category of measurement. Although US Gross Domestic Product (GDP) growth remains muted, anticipated legislation relating to tax reform and infrastructure spending should accelerate GDP and positively impact demand for transient lodging. Additionally, the current US Presidential administration's pro-business policies are seemingly beneficial for the sector.

By Daniel Lesser, President & CEO, LW Hospitality Advisors LLC (LWHA)

United States

HVS Market Pulse: Richmond, VA

Richmond, the state capital of Virginia, thrives on economic energy primarily driven by entities in the fields of law, finance, and tourism. Home to the Fourth Circuit of the U.S. Court of Appeals, the Federal Reserve Bank, and nearly a dozen Fortune 500 companies, Richmond's hotel demand generators also include tourism draws such as craft breweries and world-class museums of art and science.

By Marcus Lee, Executive Vice President, Development, HVS

Richmond, Virginia, United States

Mid-Year Report: 2017 Remains Strong

2017 is on pace to be a profitable year but it might spell the end of profitable growth as labor and health care costs are escalating beyond revenue increases. If that occurs, this would be the first year since 2010 where profits did not grow. Our outlook as of mid-year 2017 indicates it will be close but that we will fall short of another year of improved profits.

R. A. Rauch & Associates, Inc.

United States

Stable Rates with Declines in Bookings Continue as U.S. Hoteliers Close Out First Half of 2017

Heading into the second half of the year, North American hoteliers are continuing to experience stable average daily rates (ADR) alongside declines in bookings during the second quarter of 2017, according to new data from TravelClick's June 2017 North American Hospitality Review (NAHR). This marks an ongoing trend for hoteliers this year.

TravelClick, Inc.

United States

U.S. Convention center hotels boost both supply, demand

Municipalities across the United States are seeking approvals, funding or public-private partnerships to develop or redevelop their convention centers with an attached, big-box hotel. City councils in Kansas City and Oklahoma City are in process of getting approvals and funding secured while Portland, Oregon, and Chicago have such projects underway. One of the latest convention center hotel openings in the United States was the 600-room Hilton Cleveland Downtown, which opened on 1 May 2016.

By John Kelley, III, Senior Vice President, Newmark

United States

EY's Global hospitality insights - Top 10 thoughts for 2017

The hospitality industry continues to play an integral and robust role in the global economy. In 2016, key themes in the sector included innovation, globalization, technology and consolidation. Cross-border investment, large-scale mergers and acquisitions, and technology, such as data analytics, have changed the global landscape for hospitality executives.

Ernst & Young

United States

Tourico Holidays Data Shows Strong U.S. Hotel Market

Tourico Holidays, the world's fastest growing wholesale travel brokerage company, today shared encouraging data for the United States hotel industry, revealing an 8 percent overall increase in U.S. hotel bookings in 2016, compared to the prior year – and an additional 6.5 percent increase through the first 18 weeks of 2017.

Tourico Holidays

United States

Soft Brands - Future Opportunities in the Canadian Market

Soft brands represent the movement of brand affiliations into the independent hotel market, bringing distinctive properties into an affiliation that expands the franchise company's audience while nurturing the creation of unique property-specific experiences for guests. By associating an independent property with a soft brand, the hotel is able to benefit from the expansive distribution channels and marketing reach associated with a brand. At the same time, the soft brand allows the hotel the freedom to define and shape the product offering. For the traditional hard-branded hotel, the core selling feature is the highly controlled, uniform guest experience across every hotel with the same name. In contrast, the soft brand allows the hotel to be special, characterized by the geography and culture of the region in which it is situated and the history of its own creation; only service standards and soft touches are maintained across all properties stamped with the same soft brand. In short, the soft brand creates a synergistic relationship between the service standards associated with a brand and the character of an independent hotel.

By Meagan Barley, Consulting and Valuation Associate at HVS Vancouver, HVS

Canada

Antarctic Tourism Booming, Chinese Visitors Increasing | Tourism-review.com

The white continent, and more specifically its peninsula, welcomed 44 367 tourists during the winter of 2016/17, according to the International Association of Antarctica Tour Operators (IAATO). This represents a 15% increase compared to the previous Antarctic tourism season.

Further rise of 5% is anticipated for 2017/2018 – some 46 385 passengers – surpassing the historical record established during the winter of 2007/2008 (46 265 persons). Just for the record, after this season, visitation numbers dropped sharply after the enactment in 2010 of more stringent regulations for vessels wishing to navigate within this zone. Only 20 out of the 49 vessels which had been traveling to Antarctica were able to continue offering cruises in the region, which restricted Antarctica tourism to only 15 000 passengers.

tourism-review.com

Antarctica

Market Pulse: Tucson, AZ

Tucson, like much of the Southwest, has undergone a prolonged recovery since the 2008/09 recession. Tucson's hotel market realized unprecedented growth in the years leading up to 2008. But the hotel supply pipeline has been muted in recent years, and hotel performance still falls short of the prior peak. There are several factors that have affected historical hotel performance trends in Tucson, including a large amount of lower-rated government demand, which draws down the overall average rate in the market, and the relatively limited number of direct flights from Tucson International Airport. However, the extenuating circumstances behind the long-drawn recovery of Tucson's lodging market, in many ways, trace back to the performance of its resort segment.

By Michael Smithson and Ryan Wall

Tucson, Arizona, United States

Key Takeaways: The CREF/MBA Conference 2017

HVS again hosted a booth at this year's Commercial Real Estate Finance (CREF)/Multifamily Housing conference, run by the Mortgage Bankers Association (MBA). More than 3,000 mortgage and lending professionals attended the CREF conference, one of the biggest annual gatherings focused on commercial real estate assets. While hotel-specific data and discussions are only part of the overall scope at the conference, many of the insights, observations, and predictions for commercial properties also apply to hotels.

By Brett Russell, Senior Vice President and Director of Business Development with HVS, HVS

United States

Market Pulse: St. Louis, MO

St. Louis is poised to enter a post-recovery phase of economic development and expansion that should continue to support the recent growth of the region's hotel market. Numerous proposed developments and business expansions are anticipated to pave the way for continued transient and extended-stay lodging demand growth. Meanwhile, the convention center is operating at new peak capacity. While the growth of hotel supply has begun to accelerate, it remains modest in comparison to most major markets across the country, and is expected to stay in check through the near term. As such, St. Louis is ripe with hotel investment opportunities, provided that buyers and developers exercise appropriate due diligence and market research to identify assets and locations that will provide fruitful returns.

By Tim Sauer, Senior Project Manager at HVS St. Louis, HVS

St. Louis, Missouri, United States

Snapshot of the Washington DC Metropolitan Region’s Lodging Market

2016 was a solid year for the Washington DC Metropolitan region's lodging market. According to Smith Travel Research (STR), the year-end 2016 RevPAR growth for the Washington DC MD VA region was up 4.9% over 2015, ranking it 9th of the 25 top markets it tracks. The region was 4th of 25 in terms of occupancy growth at 2.2%, but 18th of 25 in ADR growth at 2.7%. The predominance of demand tied to the Federal Government and the government lodging per diem continues to limit some of the region's pricing power. While more press is given to business and tourism demand in downtown Washington, DC, neighboring suburbs, particularly Arlington County in Virginia, and Montgomery County in Maryland, are also contributing to the region's solid growth statistics despite challenges in these suburban office markets.

By Anne Purcell, Vice President with Pinnacle Advisory Group, Pinnacle Advisory Group

Washington, District of Columbia, United States

HVS Market Pulse: Houston, TX

Houston is a city of DOERS, per the latest ad campaign presented by Chevron and released in advance of Super Bowl LI, held in Houston on February 5, 2017. The ad incites the can-do spirit of a city without limits. A city that is a global leader in energy and healthcare, that consistently ranks near the top for fastest growing major metro areas, and that once put a man on the moon. While the "We choose to go to the Moon" days are gone (but not forgotten), Houston's reputation as a tough, resilient, city of DOERS remains.

By J. Carter Allen, Managing Director, HVS

Houston, Texas, United States

HVS Market Pulse: Irvine, CA

In square miles, Irvine is the largest city in Orange County, California. Irvine is also one of the most expansive master-planned communities in the nation, developed in the 1960s by the Irvine Company and incorporated in 1971. For consecutive years, MONEY magazine has named Irvine one of the best places in the U.S. (the city ranked 20th in 2016). Irvine also ranks as the third-best city in America for working parents. Over the past 45 years, Irvine's population has grown from 10,000 to nearly 260,000 residents.

By Li Chen, Vice President, HVS

Irvine, California, United States

In Focus: Nashville, TN

Nashville, capital of Tennessee, has experienced a renaissance in the last several years. Booming health care, manufacturing, and technology industries coupled with a low cost of living has led to strong population and employment growth. The ramping up of the Music City Center has bolstered room-night demand and helped push hotel occupancy to a new peak. Furthermore, the city's growing national and global profile has led to significant increases in travel and tourism; Nashville was the only U.S. city listed on Lonely Planet's Top Ten City Destinations of 2016. The following HVS In Focus report details recent performance and market trends relevant to the Nashville hotel industry, as well as data and forecasts that can assist hotel stakeholders with buying, selling, and holding opportunities.

By J. Carter Allen, Managing Director, HVS

Nashville, Tennessee, United States

HVS Market Pulse: Why Aren’t Hotels Being Built in Ski Towns?

In ski resort towns across the U.S. and Canada, a large and growing number of people are hitting the slopes. In the 2015/16 ski season alone, total skier visits approached 64 million, an increase of about 1.9 million skiers from the previous season. The most recent performance is still about 3.6 million skier visits lower than the peak season of 2010/11, showing that the industry has room for even more growth. Yet despite the climbing numbers and the continued potential for growth, few ski resorts have realized an increase in their bed base. The limited supply increases have come in the form of fractions or timeshares, not traditional hotels.

By Brett Russell, Senior Vice President and Director of Business Development with HVS, HVS

United States

US Hotel Value Gains Moderate as RevPAR Growth Slows and Cap Rates Rise

Hotel investment activity experienced a bumpy ride in 2016. With a slowdown in RevPAR growth, a stalled CMBS market, and concerns about increased supply, cap rates rose and deal activity slowed. The year ended on a positive note as lodging REIT stocks rallied and economic growth is projected to strengthen. This article, which is published biennially, discusses trends in hotel capitalization rates and provides an outlook for 2017.Following exceptionally strong hotel transaction activity in 2015, the market stalled in the first quarter of 2016 and then rebounded, ending the year with a healthy level of transactions, comparable to the level reached in 2014. Total volume in 2016, based on preliminary data reported by Real Capital Analytics (illustrated in the chart below), reached $35 billion, a decline of 30% from the $50 billion of hotel transactions in 2015, which represented a peak for the current cycle. Deal activity was put off during the first quarter of 2016, as investors and lenders reacted to the stock market correction. The Dow declined by over 8% in early January 2016 and did not fully recover until April. Transaction activity was down 60% and 43% year-over-year for the first two quarters, respectively, and then rebounded strongly in the third quarter of the year. Despite slowing RevPAR and net income growth, capital in search of yield and a safe haven continues to be attracted to the lodging industry. Hotel values continued to rise modestly in most markets over the course of the year, despite the rise in capitalization rates, due to continued RevPAR and NOI gains.The average price per key derived from total sales volume declined by 8% from $156,000 to $144,000, due primarily to the profile and locational mix of assets that transacted. A smaller number of large, full- service hotels were sold during the year, affecting overall volume and average price per key. In addition, fewer hotels were sold in the major metro markets, while investors turned to secondary and tertiary markets such as Atlanta, Dallas/Ft. Worth, Phoenix/Scottsdale, Austin, San Antonio, Birmingham, Chattanooga, among others, in search of more affordable, value-add opportunities.Major hotel sales, defined as those that sold for a price of $10 million and over, declined by 28%, and the average PPK declined by 9%, from $244,000 to $222,000 per room. The price-per-key trends should not be viewed as the value declines, as average sales price per key are greatly affected by the composition of assets sold.

By Suzanne Mellen, Senior Managing Director - Practice Leader, San Francisco, HVS

United States

Canadian Tourism Is Getting Back On Its Feet | tourism-review.com

In 2015, 18 million foreign visitors stepped onto Canadian soil, the largest tourist destination in the last nine years, according to a report released by Statistique Canada. Far from a record, this is a return to normal for Canadian tourism.

tourism-review.com

Canada

HVS Market Pulse: Washington, D.C.

Although the federal government remains the dominant influence in Washington, D.C., a diverse array of industries and institutions have contributed to and supported the growth and expansion of the region. The finance, education, healthcare, and scientific-research industries are strongly represented in and around the District, and the region is home to 20 colleges and universities, as well as Adventist HealthCare and multiple major regional hospitals. Some of the most influential financial institutions call D.C. home, including the Federal Reserve, the World Bank, the International Monetary Fund, and the U.S. Export-Import Bank. Greater Washington, D.C. also stands among the nation's top markets for commercial office space and global real estate investment. A world-class array of museums and cultural attractions support a robust tourist trade, while the convention center hosts multiple regional, national, and international events each year.

By Anne Lloyd-Jones and Chelsey Leffet

Washington, District of Columbia, United States