CHICAGO—As 2014 approaches the home stretch, speakers at the 2014 NATHIC conference shared resounding optimism about future industry performance backed up by stronger-than-expected performance so far this year.
Brand executives set the stage during the “View From the Top” general session panel. Speakers representing every hotel segment from economy to luxury agreed that major industry fundamentals share strong growth across the board.
“I can’t even remember the last time all segments in the industry were hitting on all cylinders,” said Jeff Dallas, SVP of Wyndham Hotel Group. Jim Amorosia, CEO of G6 Hospitality, echoed that statement, adding that it was a particularly strong year for his economy-segment business. “Heading into this year, we expected 6.5-percent revenue per available room growth and what we’re seeing now is actually closer to 8 percent.”
Steadily improving group-booking metrics were a significant driver of 2014’s success, according to Gerry Chase, president and CEO of New Castle Hotels and Michael Palmeri, SVP of Loews Hotels & Resorts.
“Group business was lagging, but we’re surprised at the strong group booking pace we see for the new-build Westin we’re developing on Georgia’s Jekyll Island,” Chase said. “We open in March and the booking pace has already doubled.”
Palmeri said an additional factor helping group business get stronger is the accompanying transient business. “Yes, we see longer booking windows, longer stays and consumer confidence, but there’s also a great transient following. Our volume of group hasn’t reached past peaks yet, but with strong transient growth we can find the best business for our properties.” He said year to date, Loews has seen 11 percent transient business growth across its portfolio.
For Amorosia, a key indicator that 2014 was looking good was when he saw business expand beyond the brands’ core weekend business. “Motel 6 has always been dominant in weekend business, but this year in the peak summer months we saw occupancy of 90 percent, and stays were a lot longer; guests came in on Thursday instead of Friday or Saturday, and stayed through Monday instead of leaving on Sunday.”
When it comes to supply and demand, panelists agreed that industry-wide numbers are positive, but what’s really important are local metrics. “It’s good to see overall macroeconomic trends, but supply and demand are microeconomic,” Dallas said. “It’s really a street fight.”
Chase further elaborated what he and New Castle executives look for in development, and it’s not just top-25 markets, he said. “Really, the best places to develop are where there is population growth. The worst are places where people are leaving, taxes are high and it’s tougher to do business.”
Speakers agreed that some new demand drivers are bringing hotel business to new locations and niches. Amorosia cited the growth of hotel development supporting shale and natural gas mining in the U.S., while other speakers mentioned the consistent demand in college towns and state capitals.
NATHIC speakers presenting performance and pipeline data reinforced the current trends of high performance bookended by generally favorable supply and demand numbers.
Vail Brown, VP of global business development & marketing at STR, said 2014 will exceed performance highlights previously hit in 2007 and 2013. “The only way the luxury segment can continue to grow RevPAR is through rate and they continue to do that,” she said. “On the other hand, the upper-upscale and upscale segments are working on growing their occupancy, since they saw huge supply come in 2008 and 2009.”
Mark Eble, VP of PKF Consulting USA, put it succinctly when he told the audience, “The components that have the most impact on hotel demand … are expected to be even better in the next six quarters. We expect most RevPAR growth to come from ADR. It’s a good time to own a hotel.”
Industry wide, supply growth remains muted, said JP Ford, SVP of Lodging Econometrics. He called 2014’s projected 1.3-percent supply increase “very, very benign” and said the company is forecasting 1.6-percent supply growth in 2015 and 1.8-percent growth in 2016. But at the end of the day, he reinforced the notion that the most important supply and demand metrics are local ones. “You must know your market; we can’t stress that enough,” he said