Market Report U.S.

Reasons for Hoteliers to Act Now - By Russell S. Rivard (PDF Download)

With increasing demand, low supply, and more access to capital creating a tailwind, the U.S. hotel industry has reached its cruising altitude. Hotel owners and investors should look closely at opportunities to act now on transactions, renovations, and other ways to improve their position in 2014.

HVS The Year 2014 is Opportune for Hoteliers

At the recent 26th Annual Hunter Hotel Conference in Atlanta, I served alongside other hotel buyers, lenders, appraisers, and advisors on a panel discussion of “Hotel Values in a Rising Market.” While we shared insights from our various perspectives on the U.S. hotel industry as of early 2014, it became very apparent that there is a surge of urgency among hoteliers, and with good reason. The conference’s theme—“The Time is Now”—couldn’t have proven more apt, and other panel discussions, featured speakers, and informal conversations with fellow delegates made the strong impression that now is indeed the time to move ahead with hotel ambitions. 

Reason One: Lack of New Supply 

During the recession, as business and leisure travel declined and hotel occupancy rates fell, hotels and motels shelved expansion plans and delayed openings, resulting in lower underlying demand for hotel and motel construction. Since the recession, U.S. hotels have realized an overall surge in performance over the past several years, and one of the most potent factors is the lack of new supply. The pressures of the recent recession were formidable; in fact, according to Smith Travel Research, U.S. hotel supply growth averaged less than 1.0% annually from 2010 to 2013. After the North American lodging market bottomed out in late 2009, demand rebounded, and the stalled introduction of new rooms has proven a boon to existing hotels. With lenders once again beginning to finance promising hotel projects, HVS forecasts an annual increase of 1.5% for 2014 and 2015. New hotel supply is then forecast to increase by 1.8% in 2016, followed by 2.0% in 2017.

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