to be “don’t get too excited—yet.”
In short, lodging is a sector filled with cautious optimism. After
all, the gains in early 2011 put hotels back on the map.
The sector is certainly well positioned, coming off of a relatively strong 2011. A slight second-half softening experienced
throughout the industry is expected to give way to a new wave of
demand and, depending on the segment, more development.
But questions remain, and these are on the lips of all practitioners no matter the discipline: What will be the availability of capital (especially given the growing concerns over CMBS) and what
will the election mean?
Thanks to lots of REIT activity, the industry bloomed during
the early part of last year, and figures from Nashville-based Smith
Travel Research prove the point: RevPAR zoomed up to $62.50,
clocking a 10% year-over-year change in March 2011. Things
slowed down by November, the most recent numbers available at
press time, and RevPAR dropped to $56.17 for the month. Still,
the average RevPAR rate for 2011 (through November) was up
8.2% over 2010, at $62.32. STR’s vice president of digital media
and communications, Jeff Higley, predicted that this figure
would continue to increase another 3.9% in 2012. He was careful
to note, though, that 2011 was still a year of recovery. “If you look
back at the 2009 number,” he says, “we’re not even close to catch-
“The strength of demand in the hotel industry was a pleasant surprise. Some would argue the reason was the good deals travelers were getting at hotels.”
Jeff Higley, Smith Travel Research
ing up what we lost back then. RevPAR dropped 16.7% during
the year.”
Still, Higley believes the year was mostly positive. “The strength
of demand in the hotel industry was a pleasant surprise,” he says.
“Some people would argue that the reason for record demand
was the good deals travelers were getting at hotels. This was driv-
ing some business their way.”
And this business will be driven largely by, well, the business
travel crowd, says Brad LeBlanc, Silver Spring, MD-based vice
president of franchise and development for Cambria Suites, a
Choice Hotels brand. He predicts a steady stream of bargain-
hunting executives taking up keys as corporate budgets find
room for more business travel. “As people again get face-to-face
with their clients, they have to look at more price-conscious ways
to do so,” he says.
JP Ford, senior vice president for Lodging Econometrics in
Portsmouth, NH, predicts that select-service hotels will “rule the
pipeline” into 2012. Why? “A lot of that has to do with construction financing being difficult to obtain.” Instead, the types of
“If banks continue to come to the table and leave the lending window open, or institutions look more favorably on the marketplace, you’ll have new construction.”
JP Ford, Lodging Econometrics
projects that are getting developed are the Marriott Courtyard,
Residence Inn, Hilton Garden, Hampton Inn and Holiday Inn
Express locations. Because “there are lenders in that category,”
the properties can be constructed for under $15 million and
these “brands have wide consumer acceptance,” Ford says. “From
a lender’s perspective, developing one of those select-service
hotels is a relatively safe bet.”
So if sticking with the tried and true will lead to success, or at
least a little money in the bank, then LeBlanc selected the right
category in which to grow. He explains that the company’s aim is
to further develop the Cambria brand. Fortunately, it has the
strong foundation of well-known brands like Comfort Suites and
Sleep Inn, even though it’s a step above the others under the
company’s umbrella. “We’re not heavily invested in the upscale
space,” he reveals. “We’re looking at this opportunistically, and as
we see opportunities to position the brand into the next cycle.”
It’s not only the business traveler but the vacationer who will
also leave a positive mark on the 2012 hotels market. As a result,
Sumner Baye, president of the International Hotel Network in
New York City, and LeBlanc also see resorts thriving in 2012. This
segment presents the ideal family getaway—all inclusive, all
encompassing and easy.
“Our research shows a lot of pent-up demand for travel on
both the leisure and corporate sides,” says LeBlanc, justifying the
idea that pumping up Cambria could benefit Choice Hotels.
“Vacations may not be out of the country. They may be at stateside
resorts or coastal areas, which we’ve already seen, and that will
continue in the new year, especially when it gets to May and
June.”
Similarly, Geoff Davis, president of HREC Investment Advisors
in New York City, observes “it’s much easier to sell certain family
brands that are more in favor than others—and that are easier to
finance. That has a large impact on value as well, and the transac-
tion market in general.”
Whatever the segment, as Ford indicates, the construction
pipeline for 2012 will be impacted by the fact that construction
financing and transactions will be driven by the availability of
capital. “If banks continue to come to the table and leave the
lending window open,” says Ford, “or open it wider, or more insti-
tutions begin to look more favorably on the hotel marketplace,
you’re going to have new construction.”
That is, unless you’re talking about large-scale luxury and
upper-upscale. Ford explains that increased development on new
hotels of this caliber won’t be a major factor this year because
