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Strong Hospitality Marketplace Prompts Its Own Set of Challenges for Operators

A continued positive economy, with the 2008-2009 recession firmly in the rear view mirror; excellent levels of business travel; and consumer confidence have all contributed to a sustained strong hospitality marketplace. At the same time, a number of factors, including the ability to acquire existing hotels for below replacement cost, the preference of private and public entities to purchase existing properties with in-place cash flow and the difficulty to finance new hotel construction have, so far, constrained overall growth in supply. With that said, it is important to note that strong recent sales prices have helped encourage some additional supply, especially in strong markets. This is a trend that bears watching.

As a result of the improving economy and still relatively constrained supply, we are experiencing consecutive period increases in RevPAR. Occupancies are strong and, increasingly, rates are also being driven higher.

A November 2014 “Hospitality Directions US: Our Updated Lodging Outlook” paper by PricewaterhouseCoopers (PwC) reported RevPAR growth of 8.2 percent for 2014, with accelerating group demand contributing to stronger occupancy gains. This RevPAR gain was strong across all property categories. Also, PwC projects that in 2015 hotels will reach their highest occupancy levels since 1984, with RevPAR increasing 7.4 percent, more than 80 percent of which will be derived from increases in room rates.

via Strong Hospitality Marketplace Prompts Its Own Set of Challenges for Operators, by Richard Takach, Jr..

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