CHICAGO-The numbers say it all. Well most of it, anyway. The projection for 2013 is that hotel property asset sales will continue to climb through 2013, and it’s a raft of drivers that have led Gregory LaBerge, national director of Marcus & Millichap‘s National Hospitality Group, to that conclusion.
If LaBerge is right and the numbers continue to grow, it will do so from an impressive base. He says some 2,500 transactions took place last year.
“We’re seeing some of the most favorable operational metrics today than we have for a long time,” he tells GlobeSt.com, “and this will go on for the next several years. For example, over the last few years, we’ve seen some of the lowest numbers of new hotels coming on line.”
While supply was muted, demand soared, explains LaBerge, with 2012 posting record room sales (nearly 1.1 billion nights). “And we’re supposed to blow through that again this year.”
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Clearly, he says, travel is back, not only as a part of business but also in tourism. “International travel is also flowing into gateway cities,” the executive notes.
With fundamentals shoring up, the financial markets are contributing to the growth in hotel sales. “Very few times in our history have we seen interest rates so low,” says LaBerge. “It’s a simple equation: If the cost of debt to buy is low, you can afford to pay more for that hotel.”
With a recovering economy also comes a fresher look at assets. Hotel property improvement plans, less frequent in the midst of the downturn, have returned, says LaBerge. Brands are coming to owners now with expectations of property upgrades.
Proof that the sector is returning is made clear in the numbers. Here are some sector highlights, quoted from the group’s latest report:
• Record Room Nights to Raise Occupancy, Revenue. Behind a 1.8% jump in room demand, national occupancy will rise 60 basis points to 62% in 2013. The effects of federal spending cuts slightly temper the prospect of fulfilling the forecast. ADR and RevPAR will rise 4.8% and 5.8%, respectively.
• Nominal Construction Persists. Limited development and stock removals in a record 15 states held growth in available rooms to a scant 0.5% last year. Supply will increase 0.9% in 2013, which is less than half of the long-term average. However, the pipeline is starting to fill. The number of rooms under construction rose nearly 40% over a recent 12-month stretch, indicating supply growth of more than 1% in 2014 and an even higher rate of growth in 2015.
• Foreign Visitors Coming Ashore. Florida and Hawaii posted increases in visitor volume last year on the strength of significant growth in international travel. Growing wealth in South America, China and India will continue to drive up room demand from international visitors.