Rates Poised to
Rise in 2013
One of Blackstone’s three full-service proper-
ties in the booming San Francisco hotel
segment, the Hilton San Francisco
Union Square completed a
$53-million renovation
in 2012 to improve the
functionality of 550
guest rooms.
Acombination of record hotel demand and scant construc- tion combined to drive up room revenues by more than 4% year over year in 2012 despite a stumbling economic
recovery. And assuming that lawmakers mitigate detrimental
effects of the fiscal cliff sufficiently to avoid a recession, forecasters
and major hoteliers are calling for even greater gains in 2013.
Among the hotel owners anticipating a strong year ahead is
Blackstone Group. Most of the New York City-based private equity
firm’s US hotels posted 5% to 7% year-over-year growth in RevPAR
in 2012, according to Tyler Henritze, a senior managing director in
Blackstone’s real estate group.
“We continue to be pleased with the performance of our hotels
and expect that positive RevPAR trend to
continue even in the face of a relatively
weak overall economic recovery, simply
because there
is very little new
supply,” he says.
“That combination allows for fairly healthy
RevPAR growth.”
Blackstone’s hospitality holdings
include the Hilton Worldwide chain, the
La Quinta and Motel 6 limited-service
hotel companies and a one-third interest
in Extended Stay Hotels, as well a number
of full-service properties. RevPAR growth
in the portfolio—and for the larger mar-
ket—was weaker than average in New
York, where new supply and the soft finan-
cial services sector give hotel managers
By Matt Hudgins
less pricing power, Henritze says, while the firm’s San Francisco
properties have outperformed its other hotels.
“San Francisco has just been on fire, driven by the strength of the
technology sector and the almost total lack of new supply,” Henritze
says. Blackstone’s full-service hotels in San Francisco include
Sheraton Fisherman’s Wharf, Parc 55 and the Hilton San Francisco.
The firm acquired its controlling interest in Parc 55 in 2012.
Other hoteliers report similar revenue growth, and many are
taking advantage of this strength to grow room counts through
acquisitions, renovations and even construction. The consensus is
that hotel revenues in major markets will remain strong until new
construction shifts the balance of pricing power away from managers and reins in room rates.
Starwood Hotels & Resorts opened 71 hotels
in 20 countries in both emerging and developed markets in 2012 and signed more than
125 new hotel management and franchise
agreements, surpassing the previous year’s deal
signings by approximately 13%. That’s the
highest number of deals it has inked in a year
since before the recession, according to Simon
Turner, the company’s president of global
development. He affirms that the company’s
positive momentum will continue in 2013.
“We see significant opportunities in established markets like the US, where little
growth and capital constraints over the past
several years have created record-low supply
and continued interest in conversion opportunities,” Turner says. “We’re particularly
With across-the-board increases in
demand, occupancy
and average revenue
per room, the
question is not
whether average
room rates will rise,
but by how much.
