Strong performance numbers support surging construction, investment

Positivity in the hospitality sector is at an all-time high, and numbers continue to prove that the industry is nearing the height of its growth cycle. 

New data from STR show the U.S. hotel industry saw a 3.4-percent increase in occupancy for the week of Sept. 27 to Oct. 3, 2015, reaching 68.8 percent. Average daily rate was also up 8 percent for the week to $124.96, and revenue per available room saw an 11.6-percent increase to $86.01. New York City recorded the largest ADR increase (up 24.4 percent to $367.05) and RevPAR (up 32.5 percent to $336.03). Occupancy for the city rose 6.6 percent to 91.5 percent.


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After New York, seven markets saw a double-digit rise in ADR, and four additional markets saw RevPAR increases of more than 20 percent: Philadelphia (up 28.8 percent to $106.17); Washington, D.C. (up 27.5 percent to 130.62); Anaheim/Santa Ana, Calif. (up 27.2 percent to $124.07); and Minneapolis/St. Paul, Minn. (up 22.3 percent to $96.28).

Two markets recorded a drop in ADR (San Francisco/San Mateo; and Houston). Houston reported the largest RevPAR decrease, down 9.8 percent to $72.42.

With numbers like these, it is no wonder the industry is fixated on construction. Last week, a report from international property and construction consultants Rider Levett Bucknall found the U.S. construction industry saw three consecutive months of growth, with Honolulu increasing construction spend by 2.76 percent (11 percent annualized), eclipsing New York and making it the most expensive city in the U.S. to develop in.

The firm's report found the national activity for construction jumped nearly 12 percent between the 3rd quarter 2014 and the 2nd quarter 2015, with cost escalation nationally resting at 3.56 percent for the past year.

“Three consecutive months of growth in the AIA’s Architectural Billing Index and a 12-percent increase in construction activity is an excellent sign that the U.S. construction industry is finally gaining some momentum,” Julian Anderson, president of Rider Levett Bucknall North America, said in the report. “We anticipate steady growth through the rest of 2015 and into the first quarter 2016, especially if the Fed raises interest rates in the last quarter of the year.”

In addition to new construction, The New York Times reported in late September that hoteliers are investing more in updates as well. Bjorn Hanson, a professor at the Tisch Center for Hospitality and Tourism at New York University, told The New York Times he estimated renovation spending will reach $6.4 billion this year, up 7 percent from 2014.

This spend is generated not only from a need to stay current, but to match the rising expectations of guests.

"Almost no brand requirement — ranging from guestroom desk, lighting and bathroom configuration, to restaurant menus — has been untouched,” Hanson said.