PSU Index: Hotel values project growth in 2014
Hotel values are expected to register a 7.4% growth rate in 2014, according to the Penn State Index of U.S. Hotel Values.
Hotel values are expected to register a healthy 7.4% growth rate in 2014 following a 9.1% increase in 2013, according to the latest edition of the Penn State Index of U.S. Hotel Values.
Luxury hotels are anticipated to continue to show strong value increases with a 6.7% gain in 2014, which at $23,720 per guestroom represents the highest increase in value per room of all hotel types. Economy hotels are expected to record the greatest value percentage increase at 11.1%.
At this point, it isn’t possible to project 2015 hotel values with any reasonable level of confidence, but most of the positive fundamentals affecting hotel values are anticipated to continue into 2015.
Other than the economy and luxury chain-scale segments, hotel values in the upper-upscale (+6.8%), upscale (+6.9%), upper-midscale (+6.8%) and midscale (+6.8%) segments also are showing increases for 2014. These percent changes are lower than 2013, but the value per room increased in all segments.
Click chart to enlarge.
Hotel value increases are being aided by the strong appetite for hotel investments in this uncertain economic environment, the increases in the availability of traditional debt instruments, rising consumer spending, limited upward pressure on oil prices and the limited increases in new hotel supply in most markets.
On the other hand, factors limiting the upward movement in hotel values include:
the strong fiscal headwinds due to poor or lacking management of national debt in the U.S. and Europe;
federal sequestration, which has reduced hotel demand in many markets and significantly in some;
continued high unemployment; and
limited ability for global travelers to come to the U.S. for leisure visitation.
Since the positive factors continue to outweigh the negative ones, value increases are expected to continue.
The Penn State Index of U.S. Hotel Values uses an econometric model to project future hotel values in the United States. Developed by Dr. John W. O'Neill, director of the School of Hospitality Management at Pennsylvania State University in University Park, Pennsylvania, the Index projects hotel values for the overall U.S. for the specific STR—parent company of HotelNewsNow.com—hotel property types of luxury, upper upscale, upscale, upper midscale, midscale and economy hotels. The Index originally was developed by O'Neill at Penn State in 2002 and has been updated on a quarterly basis.
John W. O’Neill, MAI, ISHC, Ph.D., is Director the School of the School of Hospitality Management at The Pennsylvania State University. He previously held unit-, regional- and corporate-level management positions with Hyatt and Marriott in a number of different cities. He can be reached at email@example.com or 814-863-8984.