NEW YORK CITY-Hospitality markets domestically and globally will awaken this year, experiencing more robust, broad-based growth by year’s end, Ernst & Young predicts in a report released Monday. E&Y is basing its prediction on a series of financial, operational, demographic and regulatory trends that bode well for the lodging sector.

Among these are a resurgence of business travel coupled with limited supply, the greater role that emerging markets will play in the sector’s future and a return of investment in hospitality assets. The release of the report, titled “Global Hospitality Insights: Top Thoughts for 2011,” coincides with the start of the start of the annual Americas Lodging and Investment Summit in San Diego.

“While the industry has suffered two years of declining fundamentals and endured the drag of a global economic recession, we believe that the worst is over and the light at the end of the tunnel is not only visible but growing larger each day,” Michael Fishbin, leader of E&Y’s global hospitality practice, says in a release. “Lodging sector recovery is a fact; resurgence is no longer far away.”

While gateway US cities such as New York City are likely to reap the benefits of increases in occupancy and RevPAR, much of the action will be overseas. E&Y describes what it calls “the China factor,” in that not only is the world’s most populous nation expected to outpace the US for business travel by 2015, but also that the Asia region is expected to produce more than 41% of the worldwide growth in outbound travel and tourism over the next decade.

China itself could account for much of this growth, due to steps taken by governments in the Americas, Europe and Japan to expedite tourist visas for Chinese nationals, E&Y says. Along with China, countries like Brazil, Russia and India are poised to drive global hospitality market growth over the next few years.

Yet while growth in travel is expected to be strong, regulatory reform is putting a damper on access to new private financing and hence new construction, as new regulations threaten to increase the cost of capital for developers and operators alike. In particular, the Dodd-Frank Act includes what E&Y terms sweeping changes for private equity funds and CMBS, two historically substantial capital contributors to the lodging sector in the US.

On the other hand, E&Y notes that with recovery in the global economy and hotel fundamentals, the public markets may be a better bet for capital. Domestically, there are 11 listed hotel REITs with a total market cap of $23 billion, most of which came through the downturn in better shape than their privately held counterparts.

E&Y expects to see a return of opportunistic investors to the hotel sector this year. Fishbin comments, “We’ve seen a few distressed asset and note purchase opportunities in the last 12 months and we have no doubt there will be more in 2011, but we also expect to see equity investors take advantage of opportunities presented by upcoming debt maturities to purchase institutional grade assets this year.”