Optimism abounds at Americas Lodging Investment Summit

By Danny King

012812ALISLOS ANGELES — Lodging analysts’ forecasts for the U.S. market at the annual Americas Lodging Investment Summit (ALIS) early last week were about as balmy as the unseasonably warm weather at the conference’s California locale, as hotel revenue was forecast to return to prerecession peaks as early as this year.

The combination of increased travel spending from U.S. baby boomers, more incoming tourism from countries such as Brazil and China and little in the way of new supply will enable occupancy rates to continue to edge forward and room rates to rise even more quickly.

As a result, U.S. revenue per available room (RevPAR), which rose 6.8% last year, will advance 5.7% this year and another 6% in 2014, Smith Travel Research Chairman Randy Smith said in a presentation at the conference.

PKF Hospitality was slightly more optimistic, forecasting 2013 RevPAR growth of 6% this year and 8.4% in 2014.

Either way, those increases would push U.S. RevPAR rates to about $69 this year and about $73 in 2014, well past 2007’s peak of $65.73. And while inflation-adjusted room rates still trail those prior to the recession, last year’s average $106.89 is about 25 cents off 2008’s peak levels.

“What should we be worried about? Nothing,” said PKF Hospitality Research President Mark Woodworth at the conference, which attracted about 2,500 attendees. “We’re having a really hard time coming up with negative aspects to this story.”

Regionally, hoteliers pointed to factors such as Asia-based tourism, technology-industry strength and how they spurred demand in markets such as Hawaii, San Francisco and Houston.

Oahu’s RevPAR grew the fastest within the largest 25 U.S. markets last year, followed by New Orleans, Houston and San Francisco-San Mateo.

012813USHotelRevParBusiness and leisure travelers also appeared to be more than willing to pay the higher room rates in Eastern Seaboard cities like New York and Boston.

Best Western International Vice President Mark Williams said hotels in Texas and New Orleans “came back with a vengeance,” while C.A. Anderson, vice president at Choice Hotels International, described demand for hotels in Maui and San Francisco as “on fire.”

“We knew Boston and its suburbs would be positive, but it absolutely knocked the cover off the ball,” added Mit Shah, CEO of the Noble Investment Group.

Sector-wise, the most buzzed-about subject appeared to be how select-service hotels are being built in urban centers and fetching rates equal to, and in some cases greater than, those of full-service hotels.

Particularly topical were Marriott International’s two dual-branded Residence Inn-Courtyard properties under construction in midtown Manhattan and downtown Los Angeles, respectively.

“Don’t tell me those hotels will not be on steroids from a design and pricing standpoint,” said Bruce Baltin, senior vice president at PKF Consulting and a panel moderator. “They clearly are select-service hotels, but we are seeing the bandwidth of quality really broaden.”

Granted, some panelists expressed concern over issues that could throw a wrench into the industry’s continued recovery.

Increased government regulations related to issues such as Americans with Disabilities Act requirements and potential immigration reform may boost costs and shrink hoteliers’ bottom line, while the continued crackdown on per-diem spending among government employees has already hampered demand in cities such as Washington, the only major U.S. market to have a RevPAR decline last year.

Additionally, hoteliers continued their refrain of retaining as much control over their online sales in order to avoid having to pay higher commissions, via wholesale pricing, when selling rooms through online travel agencies and other intermediaries.

“There are a lot of cases showing how hotel owners have been pretty stupid by selling their rooms at below cost,” said FelCor Lodging Trust Chairman Thomas Corcoran Jr.

“There’s just lots of nontraditional competition that’s going to come to bear over the next couple of years, whether it’s Apple, Google or Microsoft,” said Choice CEO Stephen Joyce. “The waters are murkier than ever.”

Regardless, ALIS panelists ranging from upscale-heavy hoteliers like Starwood Hotels & Resorts to franchisers of more moderately priced properties such as Choice almost uniformly predicted a continued recovery.

“Barring something unforeseen, we should have a pretty good year,” Joyce said.

The photo has been corrected to reflect that the panel was moderated by Scott Berman.

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