San Francisco hotels are proving to be prime investment properties in the US, with the city enjoying the greatest rate jump in 2012. Jan Freitag, senior executive at hotel industry tracker STR, told USA Today that the sector as a whole is looking in great shape for 2013, with rates set to rise once again. San Francisco in particular has had a vintage year, with room rates up by almost 11 per cent. San Jose and Oakland are two areas increasing their footfall, with many opting to leave more expensive part of the city in favour of peripheral, cheaper areas. These markets enjoyed nine per cent increases year-on-year.
However, it isn't just San Francisco that has been attracting investors and the market has proven its strength across the board. "2012 was a banner year for the US hotel industry," Mr Freitag declared to USA Today. "Collectively hoteliers sold more rooms than ever before — more than 1.1 billion." This gave the industry considerable "pricing power" - a trend that began in 2011. The reason behind this turn of events differs across the country, with rate changes in West Texas and North Dakota driven by newly discovered energy sources, for example.
Nonetheless, it hasn't been entirely good news for the country, some areas experiencing a decline in average rates. Washington, DC is just one city that didn't benefit from rising demand in 2012. Mr Freitag claims this is the result of the continued struggle the sector has with new supply and a reliance on "government per-diems and overall weak demand growth". The US election also added a degree of uncertainty to the property market in the city, causing many investors to put off purchases.
Despite this, things are likely to pick up in 2013 and STR expects room rates in the country to continue to rise. Analysts at Jones Lang LaSalle are also of a similar view, stating in their latest Hotel Investment Outlook that buyers will become much more aggressive this year. This is thanks to an abundance of equity capital and improving debt market. Transaction volumes are forecast to rise to USD 18.5 billion (GBP 11.6 billion) from USD 17.5 billion (GBP 11.1 billion).
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- Wednesday 20 February 2013