HotelNewsNow.com each week features a news roundup from a different region of the world. Today’s compilation covers the Americas.
U.S. fundamentals up across the board
Holidays mean more travel, and traveling leads to increased activity in the United States hotel market. With Yom Kippur falling a week earlier in 2010 than it did in 2009, the industry saw significant increases in all three key performance metrics during the week of 26 September to 2 October 2010, compared to that same timeframe last year, according to STR data.
In year-over-year comparisons, occupancy increased 9.8% to 61.2%, average daily rate was up 4.2% to US$99.80, and revenue per available room ended the week up 14.4% to US$61.06.
“The U.S. hotel industry reported strong performance results in occupancy and ADR for the week,” said Steve Hood, senior VP at STR. “The gains were fueled by favorably year-over-year comparables in part because of the Yom Kippur holiday, which fell on the 18th of September in 2010 compared to the 28th during 2009.”
Five markets experienced ADR increases of more than 10%: New York; New Orleans; Boston; Dallas; and San Francisco/San Mateo, California.
New Orleans reported the largest RevPAR increase, soaring 56.9% to US$68.95.
• Read “STR: US hotel results week ending 2 October.”
Rates finally on the mend
Both business and leisure ADR increased during late summer 2010 over 2009 for all major regions of the world, according to an August report from Pegasus Solutions. The monthly report, drawn from billions of transactions processed during August, also showed August business bookings made through the global distribution systems had the highest increases globally over 2009 for all three key metrics. The channel’s reservation volumes jumped 27.9%, while ADR increased 7.4%, helping drive revenue up 42.9% over 2009.
In the meantime, Marriott International reported the company returned to a profit during the third quarter as revenue rose on higher room rates. On a company earnings call, Marriott executives said the company’s rates during the second quarter rose for the first time in two years.
STR found average rates in the top 25 U.S. markets up 3.5% in August.
• Read “Marriott International reports Q3 2010 results.”
JLLH identifies four South American hotel hotspots
While Brazil, South America’s largest economy by a wide margin, offers the largest array of opportunities for hotel growth, other South American countries also boast strong demand fundamentals and a favorable investment environment.
A report from Jones Lang LaSalle Hotels identified Bogotá, Colombia; Buenos Aires, Argentina; Lima, Peru; and Santiago, Chile as the most favorable destinations for hotel investment in South America.
“Real GDP in these countries is set to increase by a compound annual growth rate of 4% or more through 2015—well above growth rate projections for most mature markets,” said Ricardo Mader, executive VP for JLLH in São Paulo.
Santiago is a preferred destination for hotel investment because of the country’s relatively sophisticated capital markets, and has often been the test market for the introduction of an international brand to South America, the report said.
• Read “JLLH identifies four South American hotel hotspots.”
Upscale Hilton developers show resiliency
Hilton Worldwide brands are the most active in the top three chain scales in 2010, each replacing competing brands that topped last year’s list.
Waldorf=Astoria replaced Ritz-Carlton as the luxury brand with the most rooms in the pipeline in 2010; Embassy Suites surpassed Marriott in activity in the upscale segment, and Hilton Garden Inn now has more rooms in the pipeline than last year’s leader, Courtyard by Marriott, according to STR data.
Holiday Inn continues to be the most active brand in the midscale-with-food-and-beverage segment with more than 10,000 more rooms in the active pipeline than Best Western, the second-highest brand in that chain scale. Holiday Inn Express exceeded Hampton Inn & Suites in pipeline activity by more than 5,000 rooms for the second consecutive year.
2010 Highest Activity 2009 Highest Activity
Chain Scale Brand % of Pipeline Brand % of Pipeline
Luxury Waldorf=Astoria 0.4% Ritz-Carlton 0.4%
Upper-upscale Embassy Suites 1.7% Marriott 1.6%
Upscale Hilton Garden Inn 3.6% Courtyard 3.5%
Midscale w/F&B Holiday Inn 4.4% Holiday Inn 4.4%
Midscale w/o F&B Holiday Inn Express 7.3% Holiday Inn Express 6.8%
Economy Motel 6 0.3% Microtel Inn 0.8%
Extended-stay Candlewood Suites 3.1% Candlewood Suites 3.1%
• Read “US pipeline activity by chain scale.”
Three markets headed in different directions
Although the hotel industry is headed in the right direction across the U.S., certain markets are expected to see increases in different forms.
Denver’s hotel market is on the fast track to recovery.
The city’s hotel industry posted positive year-over-year occupancy gains every month during 2010, averaging a 9.4% increase to 62.9% through July 2010, according to STR data. RevPAR has been less consistent, albeit generally positive.
“Denver is the second fastest recovering RevPAR city (since April 2010 based on a trailing 12-month analysis),” said Orly Ripmaster of Boulder, Colorado-based STR Analytics. “In the short term, it’s doing very well.”
• Read “Denver hotel market on fast track to recovery.”
Cleveland
On the opposite end of the spectrum, Cleveland’s 191 hotels and 22,000 rooms rank the market No. 50 in the U.S., generating US$351 million in annual room revenue. As with most U.S. markets, the recent downturn slammed Cleveland; but unlike many markets, the city’s hotel industry challenges began during the late ‘90s with a stretch of significant supply growth that resulted in eight consecutive years of occupancy decreases.
• Read “Cleveland market update.”
Cleveland’s recent performance was mixed: Room supply contracted 1% during the first seven months of 2010, while demand (roomnights sold) increased 8.8%, pushing occupancy up almost 10% to 54.3%. At the same time, ADR fell 3.2% to US$83.17. The combination of higher occupancy and declining ADR resulted in RevPAR growth of 6.4%.
Los Angeles
The Los Angeles hotel market, comprised of over 98,000 rooms spread out over 20 submarkets, is the target of significant investor interest, according to a report from Jones Lang LaSalle Hotels. A large number of high-profile properties traded in the last cycle and a growing list of high-profile assets is currently on the market, including the Sheraton Universal and Sheraton Delfina.
The outlook for hotel investors in Los Angeles is positive, JLLH reported.
“Demand fundamentals, particularly in the key group and corporate segments, continue to improve and the area’s supply pipeline will remain in check for years to come given the lack of available construction debt financing,” said John Strauss, managing director for Jones Lang LaSalle Hotels in Los Angeles. “Investors are generally seeking significant discounts to replacement cost via acquisitions. Hotel deals have already increased more than fourfold from the minimal 2009 volumes, reaching (US)$154 million year-to-date in 2010.”
The two most active buyer profiles for California real estate are U.S. real estate investment trusts, which had recent successful capital raises, and offshore buyers, primarily from Asia, who have a long-term hold strategy. As hotel cash flows continue to improve off the unprecedented declines in 2009 and debt becomes increasingly available, private equity firms that leverage acquisition financing to achieve their targeted return will gradually re-emerge.
• Read “’Positive’ outlook for L.A. hotel investors.”
Notable transactions/openings:
• LaSalle Hotel Properties acquired the leasehold interest in Hotel Roger Williams for US$90 million plus approximately US$4.5 million of additional costs.
• Chatham Lodging Trust completed the acquisition of the Residence Inn by Marriott – New Rochelle, New York, in an all-cash transaction for US$21 million, or approximately US$169,000 per key.
• InterContinental Hotels Group signed a 15-year management agreement for a new-build, full-service Holiday Inn in Cartagena, Colombia. The Holiday Inn Cartagena, is scheduled to open in June 2011.
• Hilton signed a franchise license agreement with Operadora de Hoteles y Restaurantes ITER, SA de CV to open a Doubletree by Hilton hotel near Mexico City Benito Juarez International Airport. The Hotel ITER Internacional Aeropuerto Terminal 2 will reopen as the Doubletree by Hilton Mexico City Airport Area, upon the completion of a major renovation and refurbishment project.
• Starwood Hotels and Resorts Worldwide will debut its Westin brand in Panama with two new properties slated to open during the next two years. The Westin Playa Bonita Panama will open in 2011, followed by the opening of The Westin Panama Hotel in 2012 in Panama City's Costa del Este business district.
• Hilton entered into a franchise agreement with J.G.J. Proyectistas S.A.C., a real estate developer based in Lima, Peru, to build the 230-room Hilton Lima Miraflores. The hotel is scheduled to open in Q1 2012.
• IHG expanded its presence in Argentina with the opening of the InterContinental Mendoza. Owned by KLP Emprendimientos S.A., the 15-story InterContinental Mendoza has 180 guestrooms and 24 suites. A completed second tower with an additional 72 rooms will be available shortly.
• The Four Points by Sheraton Galveston, owned by Gopal Govind Enterprises and managed by Concord Hospitality Enterprises, opened as the fifth Four Points in Texas. The 118-room hotel features the brand’s new look, developed as part of Four Points’ recently completed portfolio-wide billion dollar rejuvenation.
• Carlson opened its first Park Inn in Oklahoma with the Park Inn Tulsa Airport.
• Choice Hotels International has opened a Cambria Suites hotel in Washington, Pennsylvania. The 105-suite hotel is owned by Adios Associates, an affiliate of Horizon Properties Group and Madison Realty Group.
• The Dallas Westin City Center has been reflagged to the Dallas Marriott City Center. The hotel features 407 guestrooms and suites and a 15-story atrium that opens to a dining and retail complex and an indoor ice-skating arena.
