HVS projects U.S. hotel value growth through 2016

HVS projects U.S. hotel value growth will persist through 2016, surpassing a 2006 peak of US$100,000 per room in 2013, according to the hospitality consultancy’s 2012 U.S. Hotel Valuation Index (HVI). The HVI tracks hotel values in 66 individual U.S. markets and the United States as a whole, examining hotel supply, demand, occupancy and average rate trends.

Increases in occupancy, average rate and demand — along with limited supply growth — are expected to yield relatively strong growth in net operating income, the report said. These dynamics, along with fewer buying opportunities, will lead to a positive per room value change in the United States in 2012, according to HVS. Because of the strength of demand in the meeting and group segment, per room values for the top three U.S. convention cities — Las Vegas, New Orleans and Tampa — are expected to increase most this year.

With recovery already underway in some cities, however, hotel value growth there is predicted to be more limited. “As San Francisco’s and Boston’s per room values recovered in 2010 and 2011, the upside potential through 2016 is limited; therefore, San Francisco’s per room value is anticipated to experience a slight decline, whereas Boston’s per room value is anticipated to experience only minimal growth by 2016,” said Katharina Kuehnle, who co-authored the HVI with HVS President and CEO Stephen Rushmore.

Rushmore advised investors to sell properties in San Francisco, Boston and Washington, D.C., this year while selling properties in New Orleans, Atlanta, Chicago, Philadelphia, and Cleveland in 2013.