Healthy growth, uptick in supply highlight NATHIC

29 Nov, 2012 By: David Eisen

WASHINGTON, D.C.--Continued optimism in underlying hotel fundamentals, a growing pipeline and a shot of reality TV stardom were all part of the first day of the North America Hotel & Tourism Investment Conference here in the nation's capitol.

Anthony Melchiorri, star of Travel Channel's Hotel Impossible, was interviewed during the keynote by Mike Cahill, the CEO of Hospitality Real Estate Counselors. Melchiorri, the former GM of the Algonquin in New York, has held many hats in the hotel industry, from asset management to operations. 

Regarding his show, which is about to enter its second season, Melchiorri was quick to point out its authenticity. "I’m there to turn around hotels, not to make a TV show," he said. "I'm not there to play with their emotions because it’s good TV. I want to help [them]."

Melchiorri, whose blunt style contributes to his success in repositioning hotels, said his biggest care in the hotel industry is driving revenue per available room better than anyone else. And while the show, which vacillates between berating and advising, doesn't particularly delve into revenue management and how to drive RevPAR ("it's not good TV," Melchiorri said), it does show how to successfully operate a hotel and what it takes to do so.

One area hotels can work on: cleanliness, of course. Melchiorri said the dirtiest part of a guestroom is the bedside lamp. The cleanest: the headboard.

Melchiorri was followed on stage by J.P. Ford, SVP of Lodging Econometrics, who delivered an update to the audience on the current hotel pipeline. Ford said that new construction announcements totaled 1,218 projects consisting of 151,545 rooms, for a rolling four quarters.

"Underlying fundamentals are improving and there is a return of financing," Ford said. "This trend will continue." In terms of chain scales, Ford noted that upscale and upper-midscale is where the new projects are concentrated. Market specific, the top cities for room growth, in order, are New York, Washington, D.C., San Diego, Houston and Los Angeles. Chain-wise, as of the third quarter of 2012, Marriott International led the way with the most projects in the pipeline, totaling 557 with 68,051 rooms. With regard to transactions with a reported selling price, hotels with more than 200 rooms had a price per room of $171,928, Ford said. For hotels with less than 200 rooms, the price is $73,389 per room.

A panel on the overall state of the industry ran subsequent to Ford's presentation. It included: Scott Andrews, SVP of sales, GE Capital Franchise Finance; Bruce Lowrey, managing director, RockBridge [shown above, right]; Jalil Mekouar, COO, Americas, Jones Lang LaSalle Hotels; and Keith Thompson, founding principal, Hotel Assets Group [shown above, left]. Offering an overview, JLLH's Mekouar said there is very healthy growth right now in the industry, with RevPAR for the year tracking at 7 percent. He said that next year should see RevPAR growth between 5 and 6 percent, well above annual GDP growth.

"The overall sentiment is positive and performance is on the rise," he said. "Debt is coming back and the basket of lenders is widening, which drives competition and increases loan-to-value ratios."

While there is a direct correlation between GDP growth, unemployment and RevPAR growth, curiously, as RockBridge's Lowrey said, flagging GDP growth has not been a particular drag on RevPAR increases. With regard to customer sentiment, Lowrey said that as customer credit shrinks, they will look at hotels with high value propositions, specifically select-service properties. In regard to transactions, GE Capital's Andrews said that private equity is looking at secondary and tertiary markets. "They are high on the industry," he said. "Fundamentals are strong, ride the wave."

Topic : NATHIC, 2012

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