Year-end 2015 numbers paint picture of a vigorous industry

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A number of industry experts have released year-end 2015 hotel industry performance and transaction numbers in the past week. All are testament to the strong year the hotel industry experienced. Here are some of the highlights:

According to analysts at Lodging Econometrics, hotel selling prices hit a record high in 2015. There were 1,117 hotel sales with selling prices reported into the public domain at an average selling price per room of $162,781. This ASPR is nearly triple the $57,434 recorded for the 427 transactions during the cyclical low of 2009 and is influenced by six transactions that sold for more than $1 million per room: in New York City the Baccarat at $2 million, the Waldorf Astoria at $1.4 million, and the Doubletree Guest Suites at $1.2 million per room; in California the Malibu Beach Inn at $1.7 million per room, and the Montage at Laguna Beach and the Bardessono Inn & Spa in Yountville, both at $1.4 million per room.

Lodging Econometrics also reported that the U.S. hotel construction is at highest point since 2008. According to LE’s latest United States Construction Pipeline Trend Report, the total U.S. hotel construction pipeline ended 2015 with 4,413 projects/546,135 rooms. This is the highest year-end total since 2008, but still below the 2007 cyclical high of 5,438 projects/718,387 rooms.

HVS also released a study this week that documents how the current cycle is affecting values.

According to the study, five years of steady cap rates and rising net operating income have resulted in significant U.S. hotel asset appreciation. The current economic landscape is likely to cause hotel cap rates to rise in 2016, moderating future value gains. Transaction activity is expected to decline this year owing to the current volatility of the capital markets, following a record year for hotel transactions in 2015.

Capitalization rates derived from sales of full-service and luxury hotels in 2015 evidenced a slight contraction as a result of the larger number of hotels in markets with high barriers to entry in the data set, according to HVS. Competition for high-quality assets remained high and was fueled by foreign capital, private equity, and, in the first half of 2015, by REITs as well. In contrast, capitalization rates for limited-service and select-service/extended-stay hotels in low-barriers-to-entry markets started to rise as the potential impact of increased supply became more evident.

LW Hospitality Advisors and GlobeSt. released LW’s 2015 Select Major U.S. Hotel Sales Survey, which includes almost 200 single asset sale transactions over $10 million, none of which are part of a portfolio. These transactions totaled roughly $14 billion, and included approximately 53,000 hotel rooms with an average sale price per room of $265,000. By comparison, the LWHA 2014 Major US Hotel Sales Survey identified 152 transactions totaling roughly $16 billion including 45,000 hotel rooms with an average sale price per room of nearly $350,000. Comparing 2015 with 2014, the number of trades increased by more than 25 percent while total dollar volume declined roughly 12 percent and sales price per room decreased by 24 percent.

Forty major sales occurred in California, followed by 36 in Florida, and 19 in New York. Sixteen major sales occurred in the New York City area, followed by 12 in Boston, eight in San Diego, seven in Chicago, seven in Miami/Miami Beach, and six in Orlando, according to LW.

The U.S. hotel industry reported positive results in the three key performance metrics during 2015, according to data from STR.

Compared with 2014, the U.S. hotel industry’s occupancy was up 1.7 percent to 65.6 percent; its average daily rate rose 4.4 percent to US$120.01; and its revenue per available room increased 6.3 percent to US$78.67.

The absolute values in the three key performance metrics were each the highest STR has ever benchmarked, according to the company. The U.S. hotel industry also set records for supply (more than 1.8 billion roomnights) and demand (almost 1.2 billion roomnights). In terms of percentage growth for the year, demand (+2.9 percent) outpaced supply (+1.1 percent).

The Canadian hotel industry reported mostly positive results in the three key performance metrics during 2015, according to data from STR.

When compared with 2014, occupancy in Canada decreased 0.8 percent to 64.3 percent. However, average daily rate in the country was up 4.5 percent to CAD143.52. Revenue per available room increased 3.6 percent to CAD92.29.

The Caribbean hotel industry reported record-breaking results in two of the three key performance metrics in 2015, according to STR. For the year, average daily rate in the market was US$229.44, and revenue per available room was US$157.74. Each of those absolute values was the highest STR has ever benchmarked for a total year in the Caribbean.

In addition, the market’s 68.8-percent absolute occupancy in 2015 tied 2006 for the third-highest year-end occupancy on record behind 2005 and 2004.

All 12 months in 2015 produced year-over-year increases for ADR and RevPAR in the Caribbean. Occupancy increased year over year in nine of the 12 months.

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