Four-Year Boom Expected for the US Hotel Industry
The U.S. hotel industry is booming, more so than anywhere else in the world, and many in the industry say they expect the good times to keep rolling for a few more years until supply catches up with demand.
The United States is "the poster child of optimism anywhere around the world," Jim Burba, chair of the Americas Lodging Investment Summit and president of the Burba Hotel Network said at this year's ALIS, the world's largest hotel investment conference.
A whopping 98 percent of delegates, including investors and hotel-service providers, said they expect positive revenue per available room growth in 2013. RevPAR, as it's known, is calculated by multiplying a hotel's average room rate by its occupancy rate. Burba expects drastically lower growth in RevPAR in Asia and Europe.
"Growing demand in the face of very limited new supply sets the stage for very attractive room rate increases and therefore profit growth," said Mark Woodworth, president of hotel property-research firm PKF Hospitality.
This is "probably the best time that we've seen in the industry, in terms of fundamentals being solid, going back to the mid-1970's," Woodworth said.
Key fundamentals, including demand growth, average daily rate growth, revenue growth and profit growth are several times their long-run averages, while new construction is "well below average," Woodworth said, adding that he sees the trend continue into 2016.
The U.S. hotel industry is entering its fourth year of recovery and industry pros note the last cycle like this lasted just five years. However, since the lack of new supply has been so severe following the economic crisis, hotel owners say they think the good times will keep rolling for another four years before supply catches up with growth demand.
In addition to strength in the U.S., large hotel chains such as Hilton Worldwide, currently owned by the private equity firm Blackstone, have been expanding aggressively in China.
Hilton added 1,000 hotels to its portfolio over the last several years, with 60 percent of these properties located outside of the U.S., Ian Carter, Hilton's president of development, said.
Hilton isn't just looking to cater to domestic travelers but also building up its brand recognition so that, as more Chinese travelers go abroad, they might stay at a Hilton hotel.
