http://nreionline.com/hotel/hotel-metrics-reach-historic-highs-second-quarter

Robert Carr                                                                                                          Jul 27, 2015

U.S. hotel industry metrics continued on a strong streak in the second quarter of the year, with increases in both occupancy levels and average daily rates (ADRs), as well as revenue per available room (RevPar) growth that hit double digits in some markets.

According to data from research firms Moody’s Investors Service and Smith Travel Research, RevPar on a national basis increased 7.2 percent year-to-date. A separate report by RBC Capital Markets claims that lodging REITs posted an average RevPar growth of 6.5 percent, with strong markets such as Seattle experiencing RevPar growth of more than 10 percent.

Margaret Taylor, senior vice president with Moody’s, said in a statement that the strong industry fundamentals bode well for 2015 earnings and should offset a drag from foreign exchange transactions.

“We expect the (RevPar growth) will continue for the remainder of 2015 and are affirming our forecast for 8 percent to 9 percent EBITDA growth for the industry,” she said.

Hotel occupancy has been trending upward as well, growing 2.3 percent to hit 65.2 percent, the highest occupancy rate reached during this century and a significant jump from 2009’s 55 percent, according to Moody’s. Improving occupancy has pushed up rates, and the U.S. hospitality industry’s ADR is at historic highs as well, increasing 4.8 percent to about $100 per room.

Lauro Ferroni, senior vice president in the hotels and hospitality group of commercial real estate services firm JLL, says the higher the ADR is leading to higher property valuations in the hotel sector. Ferroni adds that the three main reasons hotels are doing so well right now include the increase in international travel, demand for group travel and the small amount of new supply added to the market. For example, overseas passenger traffic to the U.S. from non-U.S. citizens has increased 3.5 percent so far this year, according to the National Travel & Tourism office.

“With group demand, we’re seeing a much longer lead time from people booking rooms,” Ferroni says. “People who are making the decisions have more visibility on the economic outlook, and are comfortable committing 150 people to a meeting in early 2017, for example. A year ago, that person would have probably waited until only six-to-nine months out.”

Supply is another factor. Drew Noecker, vice president with CBRE Hotels, says there was a dearth of available construction financing following the recession, resulting in few new hotels under construction. Now that the market has shown improvement, there are new properties in the pipeline. Whereas demand stands at about 3.3 percent, supply will likely increase to 2 percent in 2016, according to Moody’s, and may lead to a deceleration in occupancy and RevPar growth.

“In the future we will normalize and come back in line with historic norms, but you have to remember we’ve been experiencing tremendous growth the past three to four years,” Noecker says. “Over the next 12 to 18 months, we should keep growing with limited new supply.”

Noecker says the industry’s resurgence has brought in a lot of new hotel investors, a factor that should only increase values.

“There are larger real estate companies that didn’t event target hotels before that have entered the marketplace,” he says. “The owners are the ones who will benefit, not only for their investment, but also so they can reinvest and renovate their properties, and realize rate premiums.”

http://nreionline.com/hotel/hotel-metrics-reach-historic-highs-second-quarter

http://www.globest.com/news/12_1158/national/gs15/Hotels-Investments-Roller-Coaster-Ride-360009-1.html

By Sule Aygoren | National

NEW YORK CITY—This week’s focus of GlobeSt.com’s 15th Anniversary program is on investment trends. Today, specifically, the focus is on hotels. In the Spotlight story this morningexecutive editor Natalie Dolce takes a look at the lodging sector’s performance since GlobeSt started covering it in 2000.

Lodging has certainly traversed a long course since then, having gone from being considered one of the weakest asset classes in commercial real estate to being one of the most sought-after places to pot capital—twice in the past decade and a half. Breaking down the numbers for the sector, these trends become clear, as do the players behind the most action in the marketplace.

Using data from Real Capital Analytics, we present below the trends that hotel volume and pricing has taken since 2002, the latest figures available from the locally based research and analytics firm. We also look at the top 15 buyers of hotel properties filtered by the total number of properties acquired, total number of guestrooms acquired and total dollar volume of acquisitions since 2001.

At the end of this week, we will bring together all the data and examine which firms have been the most active since 2001, and which, if any, continue to dominate the commercial real estate scene.

All information in the charts below was obtained from Real Capital Analytics.

After rising to $44.9 billion in the second quarter of 2006, hotel investment volume dipped 4.2% to $38.3 billion in the first quarter of 2007 before peaking at $80.8 billion at the end of 2007, representing a 600% year-over-year change in activity. Sales fell 72.3% at the end of 2009 to the trough of $3.2 billion, but have been steadily rising since then. Still, with volume at $45.4 billion as of midyear 2015, most would agree that the sector still has some runway yet.

Cap rates have plummeted and per-unit pricing has skyrocketed for hotel assets in the US. Caps rose to 9.4% in the third quarter of 2009 from the previous low of 8.8% at the beginning of 2008, as pricing fell from $115,000 per unit to $76,000 in the same time frame. That trend drastically reversed in the years that followed, as cap rates plummeted to 7.9% at year-end 2011 after prices escalated to $147,000 per guestroom.

Per-unit pricing declined again in third-quarter 2012 to $112,000, but picked up steadily since then, reaching $158,000 by midyear 2015. Thanks to improved performance, however, caps have yet to reach a record low again. ending this year’s second half at 8.2%,

It’s of little surprise that when it comes to hotel investment, Blackstone topped the list of most active investors across all three fields.

http://www.globest.com/news/12_1158/national/gs15/Hotels-Investments-Roller-Coaster-Ride-360009-1.html

http://www.hotelnewsnow.com/Article/16283/New-name-strategy-for-Supertel-Hospitality#sthash.p9SWjY3d.dpuf

Supertel’s name change to Condor Hospitality Trust was more than a simple rebranding exercise, the company’s CEO Bill Blackham told HNN.

• primarily in the 20th through 50th MSAs;
• less than 10 years in age; and
• investment between $15 million and $20 million.

– See more at: http://www.hotelnewsnow.com/Article/16283/New-name-strategy-for-Supertel-Hospitality#sthash.p9SWjY3d.dpuf

http://www.hospitalitynet.org/performance/global/147000409/4070897.html

Encouraging news about hotel demand, investment, and new supply inspires optimism at this year’s hospitality conference.

Keynote speakers and workshop panelists at the 2015 NYU International Hospitality Industry Investment Conference, held June 1 and 2 at the New York Marriott Marquis, highlighted positive industry fundamentals that support a very optimistic outlook for the hotel industry. The tide of optimism spread through some 2,300 attendees from every corner of the industry. Increasing hotel supply and rising interest rates remain the most conspicuous potential stumbling blocks in the current economic cycle. Concerns, however, were all but assuaged by encouraging presentations from some of the industry’s most prominent figureheads.

Capital Market Trends

Speakers and delegates noted an abundance of low-cost debt and equity sources pursuing hotel investments across asset classes and markets. Foreign investors seeking a safe haven from turmoil and risk abroad are increasingly turning to U.S. commercial real estate such as hotels as a source of relatively stable and strong yields. Meanwhile, domestic private equity funds continue to seek stronger returns by venturing into secondary and tertiary markets and are more willing to take on valueadded and repositioning opportunities. Furthermore, general commercial and high-net worth investors are attracted to the hotel sector’s reasonably strong yields compared to other commercial classes of real estate.

Within the debt markets, financing for existing assets is readily available from a variety of sources, including institutional lenders, private equity funds, CMBS markets, and community lenders. Experts in this field reported that debt terms are increasingly favorable, with loan-to-value ratios for first mortgages typically falling between 65% and 75%. Interest rates remain low, particularly for larger single-asset and portfolio loans. Although rates are widely expected to rise over the next 12 to 18 months, most increases should not negatively affect hotel values and could be offset by decreasing equity yield requirements. Construction lending is reportedly available, though on a more limited basis than debt for existing properties. Finding loans for new hotel construction is most challenging for middle-market deals; that is, those that fall somewhere between the regional owner-operator working with a community-based lender, and major development groups with ties to institutional debt sources

Limited Supply Growth

For the majority of U.S. markets, the aforementioned factors influencing construction financing, as well as rising construction costs, are expected to keep supply growth in check in the near term. Some markets, including New York City and Houston, are already experiencing the impact of new supply growth outpacing that of demand. But these are isolated cases. For the time being, new construction is predominantly of limited- and select-service hotels with relatively small room counts (fewer than 200 keys). While these types of developments may affect individual tertiary markets and Suburban submarkets, overall supply increases in most major MSAs, and the nation as a whole, should remain at manageable levels.

Demand Fundamentals Are Strong

The short- and long-term outlook for travel and tourism demand, both within the U.S. and around the globe, remains positive. Domestically, strong corporate profits continue to boost transient commercial travel and are finally beginning to revive the meeting and group segment. Meanwhile, a robust stock market and the recovery of wealth underpin strengthening demand for transient upscale and luxury accommodations. Furthermore, lower gas prices and modest wage increases are improving discretionary spending among the middle class, with positive implications for overall leisure travel. Moreover, recent improvements in U.S. visa policies, along with increased international travel promotion by the U.S. government, are expected to bring more tourism demand from abroad. The great expansion of middle or so-called “commercial” classes of developing nations such as China, India, and Brazil should bring more travelers to international markets, including the U.S.

Evolution of the Guest Experience

Guest preferences are altering the food and beverage offerings at hotels. Outside of the major urban markets, full-service hotel operations face a particular challenge. While beverage departments have potential to generate profits, food department deficits were reported to put some hotels in the red. This, among other factors in a changing hotel climate, has raised interest in select-service brands, as well as full-service “light” concepts such as DoubleTree by Hilton.

Technology continues to change the hotel guest’s experience, influencing everything from marketing to booking, from a hotel stay to post-trip reflections. According to Cyril Ranque, President of Expedia Lodging Partner Services, 90% of people who booked online in 2014 either booked or searched for hotel rooms using a mobile device or a tablet. The advance of new technologies is further driven by younger travelers’ desire for direct access and greater efficiency when it comes to hotel booking, checkin, and services. The implementation of mobile check-in, better and complimentary Wi-Fi service, service automation, and increased participation on social media sites all illustrate this trend. Experts noted, however, that this push for more advanced technology must be balanced by personalized, attentive service from hotel staff. As Stephen Wynn stated during his presentation, “it comes down to two words: Guest Experience.”

The Up-Cycle Continues

HVS expects supply and demand for the U.S. hotel industry to remain in equilibrium through this year and next, putting the industry on strong footing into at least early 2017. Investors at the NYU conference sounded more knells of optimism, shedding light on a variety of financing options for hotel transactions and new builds. This historically cyclical industry has already witnessed several years of sustained growth, but developers, owners, educators, and experts at the conference showed no concern about imminent decline. On the contrary, the fundamentals supporting the current upward trend remain strong, which should result in positive results for U.S. hotels well into the next two years.

http://www.hospitalitynet.org/performance/global/147000409/4070897.html