Modest growth lined with confidence: What does 2013 hold in store?

5 Dec, 2012 By: David Eisen

If 2012 was the year of uncertainty, 2013 should be the year of solid progress, right? Well, while the hotel industry is moving forward, the gains many are hoping for may not be as propitious as anticipated. No matter whom you talk to—the brands, brokers, third-party managers, lenders, purchasing companies—2013 could be more of the same. “It is looking to be the same as the past year,” said Ed James, principal of brokerage firm Mumford Company. “There will be a continuation of modest growth. We aren’t getting the recovery we expected, but we also didn’t see a drop or regression.”

As uncertainty came to describe 2012, it appears that “modest” will be the buzzword for 2013. “I see modest improvement in most markets, but it will still be a bit spotty,” said John Pharr, president of Strand Development Company. “Some markets, particularly those that rely on government business, will still have their struggles, but most will benefit from the recovery and resort areas will show some decent increases.”

While James’ and Pharr’s statements don’t inspire great optimism, there is cause for some, though it may be more regional than national. “We should continue to see growth in energy-rich markets, such as those impacted by the Marcellus Shale, where the availability of natural gas reserves has been leading to more job opportunities and more people in these areas, therefore leading to a need for more hotels and opportunities for high occupancy,” said Gus Stamoutsos, EVP, franchise development, Wyndham Hotel Group. 

As a whole, the U.S. hotel industry may not be the bull most hoped for in 2013, but there will be pockets of opportunity and much-improved fundamentals. And, knock on wood, there should not be any regression. John Hamilton, SVP of acquisitions and business development, Pyramid Hotel Group, expects revenue per available room to increase in the 4- to 6-percent range, mostly driven by ADR, as new supply growth continues to be slow and demand growth will provide increasing opportunity to raise rates. 

Though 2013 should be better than 2012, many hoteliers are wary of the “fiscal cliff,” the trendy term used to describe the effect of a number of laws which, if unchanged, could result in tax increases, spending cuts and a corresponding reduction in the budget deficit beginning in 2013. In other words, more uncertainty; a word hoteliers are not fond of.

Meanwhile, though acknowledging the elephant in the room, Pyramid’s Hamilton said that, while there is still much uncertainty regarding the impact of the fiscal cliff, the overall economic trend is improving slightly. 

Likewise, Gregory LaBerge, national director, national hospitality group, Marcus & Millichap Real Estate Investment Services, is thinking the glass is more half full than half empty. “Assuming the fiscal cliff is averted, there will be continued growth in room demand, occupancy and room revenues in 2013,” he said. “Also, we are at the point in this recovery cycle where steady improvements in property operations are encouraging developers and, accordingly, there will be more new properties opened in 2013.” 

Topic : Outlook, Hotels, Construction, Lending, Purchasing
External Source : Hotel Management

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