A Summary of Positive News and Statistics from the Lodging Industry!
By OJ Robinson
Increasingly good news and positive statistics are being reported by the lodging industry based on year to date performance in 2010.
We all know that the 2008-2009 period was devastating for our industry:
- US Occupancy: down 14%
- ADR: down $9.40
- RevPAR: down 18%
- Sales of US Hotels 2008: down 42%
- Sales of US Hotels 2009: down 42.7%
- Avg selling price/unit: down 39.0%
2010 year-to-date, and the future forecast show a much brighter period ahead of us. HVS Hospitality is the world’s premier hotel consulting and valuation firm and produces a “Valuation Index” based on historical data and future forecasts. Here are some highlights from their October 2010 report:
2010 YTD:
- RevPAR: up 4.3%
- Occupancy: up 5.3%
- Value per room: up 16.1%
- Hotel sales volume: up 21.5%
- Hotel sales with a per unit price over $200K: up 120%
What is most exciting about this HVS report is the future projections. After 3 straight years of significant decline, all major metrics are predicted to increase for the next five years. In 2012, the value per room is expected to surpass its previous high, and in 2013, RevPAR is expected to set a new record.
The anticipated rebound in occupancy and RevPAR will lead to hotel values that will increase up to, and then surpass the high of 2006. HVS has attributed the value of a 1987 hotel room as 1.00, and then has tracked the increase/decrease in value over the years, with projections into the future. Here is there data:
In 2009, investors shied away from the hotel sector. In 2010, dealmaking and investment has picked up dramatically. The pace of large deals has increased the most, led by REITs that have cash and can acquire hotels with no financing. For the first 6 months of 2010, hotel sales by dollar volume is up 143% over the first half of 2009. Sales by number of hotels is up 70%.
Hotel buyers are commonly looking to hold the property for a 5-10 investment period. “Flippers” are no longer active in the marketplace as it is no longer makes financial sense to buy, renovate, re-brand, and quickly sell a hotel property.
All of these data are from the whole country. What is the situation in New England? Here are my observations:
- Buyer activity has increased. I have seen more buyer inquiries lately. In my recent sale of Woodward’s Resort in Lincoln, NH, I had more qualified inquiries in the final 8 weeks of the transaction than in the previous 7 months of active marketing.
- Banks have money to lend. Interest rates remain historically low. The SBA has extended it waiver of fees.
- Flagged hotels or well-branded independent hotels remain most in demand with buyers and banks.
- The New England market is strong. Larger city locations are improving more quickly than average. The Boston market has shown a 14% increase in RevPAR in 2010 YTD, compared to 4.3% nationwide.
- The local tourist lodging business is reporting a very good summer due to near perfect weather and low area unemployment. The unemployment rate in New Hampshire just reported its 7th month of continued decline!
- If you are considering a sale of your hotel or motel, you do not need to sit on the sidelines and wait. There are buyers and banks ready to make deals happen.
CenterPoint Business Advisors is sending you this information with the intent of helping you to realize the full value from your hospitality business. CenterPoint assists business owners to build the value of their business, to plan for an exit from their business, to value their business, and to broker the sale of their business. Please contact us if you are considering a long or short term exit from your hospitality business.
O.J. Robinson of CenterPoint has many years in the hospitality industry in New Hampshire. He is the former owner of Parker’s Motel in Lincoln and is one of the owners of the Whale’s Tale Waterpark in Lincoln. He has provided consulting, exit planning, and brokered the sale of numerous lodging properties of various sizes. oj@cpointadvisors.com
Links:
CenterPoint Business Advisors: www.cpointadvisors.com
HVS Hospitality Services: http://www.hvs.com/
HVS 2010 U.S. Hotel Valuation Index: http://www.hvs.com/news/4888/hvs-presents-the-2010-us-hotel-valuation-index/