SAN DIEGO—For every person looking for advice on handling distressed assets, there must be two people looking to buy or build on the upswing, based on attendance at the Americas Lodging Investment Summit session, “U.S. Hot Spots,” which revealed the top 10 fastest growing United States markets.
Led by Mark Woodworth, president, Colliers PKF Hospitality Research, the panel tackled each top market—by definition the markets with the greatest compound annual revenue-per-available-room growth rates from 2010 to 2014, by discussing where to buy and where to build within each market.
Colliers PKF Hospitality Research
Bruce Baltin, senior VP, Colliers PKF Consulting, reported that Baltimore was expected to see an 8.2% compound annual growth rate in RevPAR through 2014. Demand would be 3% during that same period.
On the West Coast, L.A. was expected to see an 8.9% CAGR for RevPAR paired with 3% demand CAGR.
Baltin said select-service to full-service properties were good bets for investment. The total supply pipeline currently has 41 properties with 7,656 rooms, which represents 7.8% of the total current inventory.
Luxury is a segment to steer clear of based on recently added supply in Philadelphia, Baltin said. The market is forecast to see 8.7% CAGR for RevPAR and 3.7% CAGR for demand.
Newark, New Jersey
While often categorized as a submarket of New York City, Eric Lewis, executive managing director of Cushman & Wakefield, said he came around to understand Woodworth’s separation of this market from its behemoth neighbor. Lewis reported RevPAR CAGR was 8.3% and demand CAGR was 2.6%. The market had three sources of demand: corporate guests, Newark Liberty International Airport and overflow from Manhattan.
He suggested buying below the full-service chain scale segment if you could buy below replacement cost.
executive managing director
Cushman & Wakefield
It’s the best performing market in the country and RevPAR CAGR is expected to maintain 8.2% through 2014, Lewis said. Demand CAGR is forecast at 4.7%.
Lewis said a problem he sees is the new supply, which by some accounts is 20% of the existing supply. Indeed, current STR pipeline figures show the total pipeline is 27% of the current inventory.
There were two notable hotel sales—The Pennsylvania Hotel and The Roosevelt—which are likely to fall out of the supply, Lewis said.
“If you can build it, go ahead and do it,” he said. He suggested south of 96th Street in the limited-service and select-service segments.
Chuck Pinkowski, owner of Pinkowski & Company, said the Jacksonville market action was on the beach: “east of (highway) 1A not including Amelia Island. That’s where you want to be.”
The market is expected to see RevPAR CAGR of a robust 9.7% and demand CAGR of 4.4%.
Pinkowski cautioned new building ordinances limit building height to 35 feet. He said the best place to build would be St. Johns Town Center, a retail development.
Pinkowski & Company
Down in the heart of Texas, Houston is expected to see 8.2% CAGR for RevPAR and an astounding 6.1% CAGR for demand. Pinkowski said the RevPAR change is misleading in that it is a comparison against unnaturally inflated figures while people were displaced from Hurricane Katrina.
He said not to buy anything downtown.
Jamie E. Schwartz, VP of HVS San Francisco, reported Oakland, California, RevPAR CAGR is forecast at 9.7% and demand CAGR is 3.1%. He said the expansion of Google and Apple will help the market, which currently has nothing under construction and only 12 total projects in the pipeline.
Schwartz said Portland is a stable market with tech and biotech industry demand feeders. The RevPAR CAGR is 8.6% and demand CAGR is 3.7%.
He indicated the 2013 expansion of Intel would create increased demand in the market.
Seattle was expected to see 8.2% RevPAR CAGR and 3.1% demand CAGR. The downtown area had good potential, Schwartz said. He pointed out the Bellevue submarket where Expedia is based only had one proposed hotel.