Hotel Expert Recap on Current Lodging Forecasts for Investors

With hotel expert analysis showing the prospect of growth and opportunities of increasing gross margins, you would expect that investors and financiers are taking the opportunity to cash in on projected returns. Having gone through the recession and came out scathed, the hotel industry has seen a great reduction in investment prospects since 2008 to 2010. Inasmuch as the industry has recovered to its pre-recession state, the feel in the industry is mostly reserved, if not boarder-line unenthusiastic. The sentiments felt across hotel owners and managers are contrary to the expected growth as projected by expert metrics. Occupancy Percentages According to Smith Travel Research, U.S. hotels occupancy percentages in the first quarter of 2013have increased by 1.8% to 57.7 percent. This indicates that the industry has recovered from the recession that saw hotel and travel bookings take a nosedive. Average Daily Room Rates (ADR) Hotel expert analysis by STR for the first quarter of 2013indicates a significant growth of 4.5% to $108.31, indicating increasing gross margins in the industry. This is an inadvertent indicator of a growing demand, which is expected to experience growth for the rest of the year according to PKF projections, drawn from STR and Moody Analytics. Revenue Per Available Room (RevPAR) With increased room night sales marking the 250 million mark, the industry RevPAR increased by 6.4% in the first quarter, catalyzed by increased Average Daily Rates, achieving a remarkable $62.47 per room. Industry Projections and Prospect Sentiments The Lodging Executives Sentiments Index (LESI) indicator, which models after the Institute of Supply Management (ISM), projects a rather reserved response to the indicated growth in the hotel industry by the STR metrics. LESI indicators have a 50 point mark indicating an expansion or a decline in the industry in either direction. According to LESI, 31% indicate confidence in the following months, expecting growth, as opposed to 69% who do not expect change in either direction. The industry is expected to grow, following studies by PKF using STR and Moody analytics. The hotel consulting and travel expectations project the growth of occupancy for the remainder of 2013to grow by 1%, while ADR increases by 4.5% and RevPAR by 6.1%. Going by these figures, most investors would achieve reasonable confidence for a buy in this growing industry. Achieving Value for Money While it is perfectly reasonable to look at projected figures in determining prospects and profitability, the industry is time and season sensitive, and short term returns are common for establishing ROI. Determining the “Hotel Market Cap” rate would probably be a better approach by a hotel investment advisor for advancing or investing in the industry in response to a growth in demand as is expected in the coming year. Further projections by PKF for the consecutive year are by no means discouraging, citing a healthy recovery from the recession that saw the closure of many amortized properties, driving down the demand in the industry to a crisis level. There are a few investors who stuck it through for the past years, and are now experiencing 25-35% gross revenue margins. Objective Look at Financing On one hand, you have a fairly profitable growth in the industry and the future prospect of profitability is good. On the other hand, you hold back citing past experience, and possible changes in the economy to be expressed in the loss of your investment, while the prices on investment opportunities rise with demand for industry services. Your financier will base their interest rates on market pricing, projected operating cost and the cost of the property. With a projected 25-35% gross margin, the possibilities of ROI are better than before, closely matching a post-recession era. Summary The prospects are looking better than before, though the confidence has not achieved an all time high to increase the rate of growing demand. However, prices are increasing with projected growth in the market from an analysis of these hotel expert metrics and it is the time to buy or invest.