Market trends, fundamentals, still in hoteliers favor

(hotel exterior)

The going is still good for those vested and invested in the hotel industry. Such was the tone at a recent seminar hosted in Manhattan and as reported by GlobeSt.com.

Those involved included HREC’s president Geoff Davis and CEO Mike Cahill; Ross Woods, principal, Hotel Investment Strategies; Michael Bellisario, senior research associate, real estate, Robert W. Baird & Co.; and Leslie Ng, CIO, Interstate Hotels & Resorts.

“Occupancy will continue to be strong through 2015 and then it will slow down as new supply comes online,” said Davis. “The growth of new supply has been tempered.”

In regard to what's being developed, don't expect much in the full-service segment. “I think you’ll see few full-service hotels built in suburbs for the next decade,” said Davis.

“This is one of those rare times you get every cycle where you can say ‘the window is wide open and it’s beautiful outside.’ And we’re not even at 51 percnet of the volume where we were at the peak,” said Cahill.

Of course, where there is optimism, there, too, is pessimism. “There’s been no ‘real RevPAR’ growth since 1958," said Woods. “It’s just been oscillating.”

In terms of markets, Woods said New York City, Miami, Anaheim, Calif., and Atlanta will "likely show the largest returns and there’s an insignificant spread on cap rates between primary and tertiary markets. Credit is not the biggest challenge; it’s our inability to quantify and price risk.”

Manhattan's occupancy levels increased 2.5 percent to 88.8 percent and ADR increased 3.7 percent. This combination led to a 6.3-percent increase in RevPAR.

So, what are investors looking for? Gateway markets still top the list, where there are higher barriers to entry.

Entrants to the select-service sector are creating a shifting dynamic, said Ng. “Blackstone [Group] has come into the space, which has had a big impact. The company’s stated goal is $5 to $7 billion in select service over the next few years. Non-traded public REITs in the top 25 markets also are coming into the space.”

Ng also spoke of other trends that could shake-up the hotel industry, including Airbnb and crowdfunding.