Preview 2014: Hotels

A rendering of the Roosevelt Crown Hotel Miami Beach

When it comes to prognosticating about the U.S. lodging industry in 2014, analysts are no longer fence-sitting — and, much to the delight of prospective hotel developers, neither are bankers.

Granted, the year ahead could hold unavoidable risks. Speaking at the STR Data Conference in Nashville in September, PKF Hospitality President Mark Woodworth ticked off a number of factors that could end the positive momentum in both room and occupancy rates for the U.S. lodging industry: a demand shock, a jump in energy prices, another housing bubble and overbuilding hotels.

Fortunately, he didn’t think any of those bombs were likely to fall.

“We think there are really no threats historically to what’s caused the end to the good times,” Woodworth said.

Indeed, despite a still-tepid U.S. economy, budget sequestration, a partial government shutdown and attempts by some members of Congress to curtail government travel, revenue per available room (RevPAR) continued to advance steadily.

That kind of growth in the face of such major headwinds left analysts little reason to restrain their predictions.

For example, PricewaterhouseCoopers (PwC) called for 2014 RevPAR growth of 5.9%. While that was down from PwC’s previous forecast of 6.2%, it also represented slight acceleration from the 5.6% growth rate forecast for this year. PwC pegged 2014 occupancy at 62.9%, up from 62.2% this year and the highest since 2006′s 63.2%. PwC also said room rates would advance about 5% next year, to $116.47.

Meanwhile, STR predicted RevPAR growth of 6% in 2014, climbing from 5.7% this year. And while demand growth in recent years has been of the top-heavy variety, led by the luxury sector, 2014 should see the playing field even out, as almost every sector, from luxury to economy, will see RevPAR growth in the 5% to 7% range, both companies say.

At the same time, investors are intent on making good on those demand increases. With the U.S. lodging industry marked by minimal supply growth in recent years as wary bankers became more conservative with their lending, developers are starting to get financing again.

STR reported that in October the U.S. development pipeline totaled almost 339,000 rooms, marking a 17% jump from the number of rooms in some phase of development a year earlier. The number of rooms actually under construction is rising even faster, as the almost 99,000 rooms being built represent a 29% surge from a year earlier.

As for specific sectors, upper-upscale and upscale appear to be gearing up for the largest supply jumps, reflecting the continued popularity of select-service hotels among developers.

“We’re in an unbelievable supreme supernova of activity,” Bruce Ford, senior vice president at hotel-development research company Lodging Econometrics, told the Lodging Conference in Phoenix in September.

Nowhere is the optimism better represented than with Hilton Worldwide’s IPO in December. Owners Blackstone Group announced in September that it would raise about $1.25 billion by selling shares to the public. But that target expanded substantially in the ensuing months, and the company raised $2.35 billion in its offering, reflecting what’s apparently confidence in both the overall lodging industry and a company that still operates primarily in North America.

Hilton usurps Starwood Hotels & Resorts as the country’s second-largest publicly traded hotel company by sales, after Marriott International.

Boutique hoteliers continue to make inroads by targeting both primary and secondary U.S. cities.

Commune Hotels & Resorts is looking to open a Roosevelt-branded hotel out of a converted Miami Beach apartment complex next year. Commune’s former business partners, the Pomeranc family, which founded the Thompson badge, will rebrand the Thompson properties it kept after selling out to Commune, including three New York hotels.

And both Ace Hotels and Kimpton Hotels & Restaurants will open their first Pittsburgh properties in 2014, while Kimpton will also debut its first hotel in San Antonio.

Finally, New York City will continue to be a hotbed of opening activity next year. January will mark the grand opening of the city’s tallest building housing only hotels. The 68-story project will include a 378-room Courtyard topped by a 261-room Residence Inn. And in the same month, the 379-room Loews Regency Hotel will reopen following a one-year, $100 million upgrade, as will the century-old Knickerbocker, which is being reconverted to a hotel from an office building.

Source travelweekly

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