Ownership market healthy as cash flow, transactions improve

The Hampton Inn & Suites San Jose, Calif.,

The Hampton Inn & Suites San Jose, Calif., is just one of many new developments produced by The Procaccianti Group in 2013.

Picture: The Hampton Inn & Suites San Jose, Calif., is just one of many new developments produced by The Procaccianti Group in 2013.

Paul Sacco, chief development officer for the Procaccianti Group

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Recent projects:

* Westin Chicago North Shore, Wheeling, Ill.

* Hampton Inn & Suites San Jose, Calif.

HM: Identify the most important trend that influenced hotel ownership in 2013?

PS: In the post great-recession industry there has been a lot of upward momentum in the economy. With that comes an increase in deal activity in the major markets.

HM: What trends will affect hotel ownership in 2014?

PS: The economy is doing well now, and with that we are expecting to see more people putting out capital and seeking new deal and acquisition opportunities. If the momentum continues, the opportunities available will increase somewhat.

HM: What is your biggest concern as a hotel owner as we move into 2014?The Le Méridien hotel in Atlanta is the first to open in the Atlanta metropolitan area and one of nine new Le Méridien hotels slated to open within the next 12 months. The hotel is owned by RockBridge Capital and managed by Wischermann Partners.

PS: We are optimistic, but want to continue to operate effectively. Owners will have to make smart portfolio decisions in 2014 to take advantage of the upturn.

HM: How would you describe the hotel ownership market in 2013?

PS: As a management company that has been through multiple economic downturns, we have been able to capitalize post-recession on additions to portfolios and renovations. Being a management company that maintains a strict bottom-line focus has served us well.

Picture: The Le Méridien hotel in Atlanta is the first to open in the Atlanta metropolitan area and one of nine new Le Méridien hotels slated to open within the next 12 months. The hotel is owned by RockBridge Capital and managed by Wischermann Partners.

James Merkel, president and CEO of Rockbridge Capital

Recent projects:

* Le Meridien, Atlanta

HM: Identify the most important trend that influenced hotel ownership in 2013?

JM: Hotels are transacting now, they are changing hands, which is healthy. This started In 2012, but continued into this year, and owners are now in a position to transact or sell their hotels, and many are doing it.

HM: What trends will affect hotel ownership in 2014?

JM: The strong market will continue to be upheld in 2014. There are still significant amounts of supply that need to change hands, be renovated or repositioned going forward.

HM: What are your industry forecasts overall for 2014?

JM: The industry will continue to see growth in fundamentals as hotels with completed renovations are able to command higher rates. Rates are going to continue to grow, which is representative of a healthy market.

HM: What is your biggest concern as a hotel owner as we move into 2014?

JM: The greatest fears come from that which is beyond our control. What the federal government does impacts us, influences our business and potential disruptions are more prominent than ever, such as with the sequestration and recent shutdown. Owners have to be prudent and manage themselves through those situations.

HM: How would you describe the hotel ownership market in 2013?

JM: In 2013, the fundamentals were strong, supply growth was low and hotels were able to go through with transactions. This was a healthy year, and we are optimistic that those basic fundamentals will remain strong.

Douglas Dreher, principal, president and CEO of The Hotel Group

Recent projects:

* DoubleTree by Hilton – South Bend, Ind.

HM: Identify the most important trend that influenced hotel ownership in 2013?

DD: The cost of CapEx and maintaining quality and upkeep of properties. Also, the growing need for dynamic pricing and revenue management given the transparency of rates and property information, and the growth of the Internet to search and book for stays.

HM: What trends will affect hotel ownership in 2014?

DD: New supply. Under construction is up 30 percent over the prior year, and many markets have looming new supply that may adversely impact demand and rate momentum.

HM: What are your industry forecasts overall for 2014?

DD: Approximately 5 percent growth in RevPAR. Slower demand growth given the political climate in Washington, coupled with the lingering effect of sequestration and new supply opening in certain markets. Most RevPAR growth is expected to come from rate.

HM: What is your biggest concern as a hotel owner as we move into 2014?The DoubleTree by Hilton – South Bend, Ind., was acquired by The Hotel Group in 2011.

DD: The lack of viable value-added acquisition opportunities for growth. There is quite a bit of capital chasing deals and driving up pricing, and we are supplementing our growth via working on several new-build development opportunities.

Picture: The DoubleTree by Hilton – South Bend, Ind., was acquired by The Hotel Group in 2011.

HM: How would you describe the hotel ownership market in 2013?

DD: A challenging market. Industry wide there have been costs increasing on many fronts, including labor, benefits, insurance, real estate taxes and CapEx. Overall, the growth in rate has helped to offset some of the cost increases.

Hotel owners were satisfied with industry growth in 2013. Transactions have finally become more frequent after years of stagnation, and low supply growth allowed the market to remain healthy. However, the government sequestration and shutdown—and the possibility of another shutdown looming—have created uncertainty for owners, especially their effect on business travel. Looking to 2014, owners are expecting growth in RevPAR, led by increased rates. Owners still recognize there is a large amount of untapped supply to be renovated, refocused or sold throughout the market, making room for another strong year of transactions.

by the numbers

Room night growth up 

The group segment is up 2.7 percent over the same period in 2013.

NEW

New group business down 

Business for new groups is down 14.2 percent over the same period last year.

TRANSIENT.

Short-term stays up Transient room nights are up 5.3 percent compared to the same time last year.

COMMITTED.

ADR good on the books

ADR is growing, up 3.9 percent based on
reservations on the books for 2014.
Source: TravelClick 2014 outlook

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