Healthy growth predicted for US hotel market

The supply of US hotel rooms is expected to grow by 2.5% this year or faster than last year, according to Lodging Econometrics, but the market should remain healthy throughout 2007, say various forecasts.

“The nation’s lodging markets, most of which are past their post-9/11 recovery phase, are absorbing the additional supply. Nonetheless, the economic conditions in 2007 may lead to more moderate lodging demand,” said Mike Straneva, head of Ernst & Young’s real estate transactions group.

Revenue per available room, a key measure of hotel financial performance known as revpar, rose 7.4% last year despite only marginal growth in room occupancy, according to Smith Travel Research.

“2006 lived up to expectations … so far for 2007, the crystal ball shows revpar continuing to substantially outpace inflation, although below the gains of 2006,” Mr Straneva said.

The exact trend will depend on U.S. economic growth, he said. Revpar growth is being driven by room rates rather than occupancy, which has started to slip, but Mr Straneva said much of that is due to sophisticated yield management on the part of hotels.

“It’s all about selling the right rooms to the right groups,” Mr Straneva said.

He acknowledged that there could be some slowdowns from consumers as prices continue to rise, which is one of the reasons US hotel operators are placing more emphasis on international expansion.

“That’s a huge deal right now … how are they going to launch limited-service hotels in other markets?” he said.

Among recent developments and expansions:

ü       IHG (InterContinental) Hotels Group says its Americas region, with a current portfolio of 2,930 hotels, comprises 80% of the company’s global pipeline with record-breaking signings across all brands. The company says it is now the world’s largest hotel group by the number of rooms.  At the center of this growth was 380 new license agreements signed for the Holiday Inn and Holiday Inn Express brands. 

ü       Hilton Hotels Corporation anticipates adding 1,000 hotels within North America in the next five years, and 1,000 hotels to its portfolio outside of North America, or internationally, within the next 10 years. Currently with the industry’s largest development pipeline for any U.S.-based company — and the strongest in the company’s history — Hilton Hotels Corporation has more than 775 hotels and 110,000 rooms in development.

ü       Officials of Hampton, the national brand of mid-priced Hampton Inn(R) and Hampton Inn & Suites(R) hotels, announced the opening of its 1,400th hotel and 140,000th room with the 135-room Hampton Inn-Majestic Chicago Theatre District hotel in downtown Chicago, Ill.

ü       Carlson announced that 2006 system-wide sales from its global, company-owned and franchised brands and services reached record levels. System-wide sales totaled $37.1 billion, a 7.8% increase, compared with $34.4 billion in 2005.

Report by David Wilkening