With Rising Profits Ahead, Hotels Start Pushing the Envelope
As hotel owners become increasingly optimistic—and profitable—a brighter future is driving new investments and innovation, say industry insiders, who are forecasting improvement in several key metrics for 2013.
Bjorn Hanson, divisional dean of the New York University Tisch Center for Hospitality, told CNBC that the all important RevPAR metric (revenue per available room) will reach pre-recession levels this year. Overall, RevPAR will grow about 6 percent, he said.
"When we look at profits per room, the trend is positive and there is lots of good news," Hanson said. "In the long term, we've had a lot of recovery that is driving these good ratios."
However, Hanson expects that the overall demand for lodging in the U.S. will grow between 1.5 percent to 2 percent, which remains below the long-term average. "One of the reasons that RevPAR will grow at 6 percent is because we have such slow supply growth," he said.
This perspective is echoed by others in the industry, such as Jan Freitag, vice president of global development at STR, an analysis firm that tracks hotel demand. Freitag told CNBC's "It's a Trip" that even in the short term, prices are headed up by approximately 4.5 percent due to lack of supply.
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"With occupancy as high as it is, rooms are scarce," said Ken Cruse, CEO of Sunstone Hotels. "We're back at prior peak levels, but we haven't yet hit prior peak rate levels yet." Cruse said that the industry is entering a "sweet spot" where this demand will translate into higher profitability for the industry.
With improving prospects for the hotel owners and operators, those heading up major hotel brands are pushing innovation in several directions.
One major innovation going on right now is the roll-out of a "lifestyle" brand of hotels catering to guests focused on fitness and wellness. InterContinental Hotel Group's newest brand, Even Hotels, promises amenities such as exercise balls and other equipment inside every room, with an emphasis on an active stay.
Kirk Kinsell, president of IHG Americas, said that the brand focuses on four pillars: healthy eating, fitness, resting easy, and the ability to "accomplish more" on a given trip. "It's those four elements that Even Hotels brings together in a holistic way at a very moderate price," he said.
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With Choice's system, franchisees can respond to changes in their business remotely and in real-time, giving them greater flexibility, said the company's CEO Stephen Joyce.
"We are so connected now technically that our folks can be in India and they can still monitor their properties on a day-by-day or hour-by-hour basis," he said. The system will use cloud servers in central locations, avoiding the need for local computers and servers within individual hotels.
Choice is looking to offer this system, which includes booking and payment information, not just to its franchisees, but to other hotels brands owned by other companies. Joyce said that licensing his technology is a new growth area, offering the company an additional revenues stream on top of increased efficiency and security.