What is Really Going on in the US Hotel Market?

Figures have portrayed the US hotel market as one ripe for property investment, with demand high and transactions going from strength-to-strength. However, just how far this is an accurate depiction of the sector is questionable...

Figures have portrayed the US hotel market as one ripe for property investment, with demand high and transactions going from strength-to-strength. However, just how far this is an accurate depiction of the sector is questionable. The World Property Channel reported that although sales tracked by Real Capital Analytics stood at USD 1.6 billion (approximately GBP 1 billion) in January - a volume rise of 87 per cent since 2011 - this was the result of several large acquisitions, rather than an enhanced appetite for hotels. What's more, the sequester will impact upon the property market, particularly those such as Washington, DC.

Nonetheless, there are strong fundamentals in the country, which are helping to drive investment in the hotel sector. Mark Woodworth, president PKF Hospitality Research, LLC, told the World Property Channel: "The U.S. lodging industry, in terms of profitability and demand, continues to improve. We see more and more investors getting into the hotel market, although we still have a long way to go to get back to peak (2007) numbers."

He added that business and consumer spending have also been improving, which are two important fundamentals for the hotel industry. "We have been seeing record levels of inbound international travelers to the U.S. in 2012 and 2013 and the trend line seems to be firmly in place," Mr Woodworth stated. Forecasts have also taken into account reduced business traveller numbers, meaning that the sequester is unlikely to derail recovery in the near term.

So just how strong is the US hotel market? It seems, the answer is "medium to fair". True, there are some potential alarm bells around the corner and large transactions can distort perceptions of demand, but the sector has shown that it is continuing to perform well. Data from STR showed increases across all three key performance metrics during January. Occupancy rose by 3.6 per cent to 51 per cent in the month, while average daily rate was up by 5.1 per cent to USD 105.96 (GBP 70.34). Revenue per available room also increased by 8.8 per cent to USD 54.02 (GBP 35.86).

- Friday 08 March 2013

*This page is provided for information purposes only and should not be construed as offering advice. Flex Profit Hub is not licensed to give financial advice and all information provided by Flex Profit Hub regarding real estate should never be treated as specific advice or regulations. This is standard practice with property investment companies as the purchase of property as an investment is not regulated by the UK or other Financial Services Authorities.