Industry NewsDespite Good Times, Industry Concerns Loom

Despite Good Times, Industry Concerns Loom

Bob Hunter set the tone the moment he stepped on stage to kick off the Hunter Hotel Investment Conference in Atlanta yesterday. “Now is a great time to buy, sell, or renovate,” he said. “Pull the trigger. Lenders are active and buyers are paying top dollar.” As the CEO of Hunter Hotel Advisors, Hunter’s edict to go forth and transact is well founded. The industry fundamentals have never been better with demand continuing to outpace supply and revenue per available room (RevPAR) growth breaking records in several areas of the country.

As usual at hotel industry conferences, much of the talk was about how long the lodging industry would remain at the peak of this current cycle and how much longer until the good times became not so good. “We’re at the peak,” Mark Woodworth, president at PKF Hospitality Research, said during one of the conference’s opening panels. “If our forecast is correct, real RevPAR will peak in 2015 and then trickle down from there.”

Raj Trivedi, EVP and chief development officer of La Quinta Inns & Suites, had another take on the cycle question. “We are finally at the point where acquisition costs are higher than replacement and new development will take place,” he said, adding that the current transaction cycle should run for the next two to three years. Liam Brown, president of U.S. and Canada select-service and extended-stay lodging and owner and franchise services at Marriott International, confirmed this take. “Bigger projects are getting done,” Brown said. “A few years ago, you never heard of full-service projects getting done. There is also an abundance of financing for the upper-midscale segment.”

So the deals are out there, and the continuing ramp up of new development will slowly drive supply up, but it will still remain low for the near future. Despite the good times for the industry, a few panelists pointed out items of concern regarding data security, online rental marketplaces like Airbnb, and the impact of the strong dollar on inbound international travel. Vail Brown, vice president of global business development and marketing at STR, presented the latest numbers from gateway markets and the impact currency exchange rates are having across the globe. “[Currency exchange rates] could really have some strong implications in 2015,” Brown said.

Woodworth showed new data on the U.S. markets where Airbnb supply exceeded more than 5 percent of the traditional hotel supply. “The data suggests that as the supply of Airbnb units grows, the magnitude of rate increase diminishes.” He added that Airbnb has really made it so much easier for consumers to know what their alternatives are, but it’s still hard to measure its true impact. Fortunately, increased revenues and rate growth are helping cover some of these issues, said Pratik Patel, principal of REM Hospitality and current AAHOA chair. “But as an industry, we should focus on capturing what’s good about our biggest threat, and try to implement it better so we fill the void that these threats are planning to fill.”

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