Summer Hotel Industry Forecast Is Partly Sunny

LOS ANGELES Hotel industry leaders are expressing renewed optimism for the rest of the year and into 2011, with performance expectations and mergers and acquisition activity poised to pick up, albeit marginally and slowly.

Speaking at the ALIS Summer Update in Los Angeles this week, analysts largely predict an upswing, although most caution that while the worst is probably over, the hotel industry is not yet out of the woods.

While PKF Consulting’s Mark Woodworth says there is potential for the United States hotel industry to grow RevPAR by 10% in 2011. Smith Travel Research’s Mark Lomano, however, calls that forecast “pretty aggressive.” Woodworth further expects the eight consecutive quarters of U.S. rate decline to finally halt in the fourth quarter of this year.

Asia Pacific to lead rebound

Perhaps not surprisingly, Arthur de Haast of Jones Lang LaSalle Hotels, London, says major worldwide gateway cities and Asia Pacific will lead the hotel industry out of the depths and toward recovery. De Haast predicts that increased hotel transaction volume worldwide should reach US$12 billion to US$14 billion for 2010, adding that REITs are most responsible for driving this volume. To date for 2010, deal volume in the United States is up 115% over 2009.

Appreciation of hotel real estate has already begun and will persist through 2014 as cap rates fall farther, Woodworth says, but he warns that meaningful new hotel development in the United States is probably stalled until 2013 or 2014.