Here is a Bloomberg article on an improving hotel market. Rents and occupancies are up, and sales are following this trend. I have been thinking that hotel metrics should be improving making the hotel asset class an attractive investment in the rebounding economy. The travel deals available a year ago are no longer available. Here is the heart of the article:
A rebound in business and leisure travel is helping the U.S. lodging industry recover after last year’s recession sent occupancies to a 30-year low. Hotels can boost rates quickly to take advantage of economic growth, while tenants at offices and retail properties tend to sign multiyear leases.The article goes on to compare and contrast hotels with other classes of real estate, and makes the case that hotels can respond quicker to an improving economy. One important point that the article did not mention is new construction or lack thereof. The hotel sector was overbuilt during the heydays of easy credit, and limited service hotels seemed to litter many corners. I don't suspect there is any pending new hotel construction, except maybe some major metropolitan infill, and would be surprised if any sizable hotel development is even in the planning stage.
“Hotels have already absorbed the downturn,” said Richard Jones, executive vice president of acquisitions and operations at Atlanta-based developer Portman Holdings LLC. “It’s not as evident what exactly the impact of this downturn is going to be for other commercial real estate.”
Owners of offices, shopping centers and other buildings with pre-recession leases are now signing agreements that will result in “significant cuts in rental income” said Jones, whose company develops lodging, office and retail properties.
Income for hotels, meanwhile, is rising. Revenue per available room, or revpar, in the top 25 U.S. markets rose to $73.87 during the first half from $71.08 a year earlier, according to Smith Travel Research Inc. of Hendersonville, Tennessee. Occupancies climbed to 63 percent from 59 percent during the period, while remaining below 2008’s 66 percent.