Market Overview
Why Invest in Limited Service & Select Service Hotels?
Highlights from Jones Lang LaSalle Hotels’ forecast: May, 2009
U.S. RevPAR is forecast to decline 12.1 percent in 2009. The RevPAR (Revenue Per Available Room) drop in 2009 is the result of 7.4 percent ADR (Average Daily Rate) decline and a 5.1 percent decrease in occupancy.
U.S. RevPAR growth is projected to resume in 2010, averaging 0.6 percent growth for the year.
In 2011, U.S. RevPAR is projected to grow 4.7 percent, the highest growth rate since 2007.
By 2013, U.S. RevPAR is forecast to exceed the previous peak achieved in 2007 ($65.5).
In 2013, U.S. ADR is expected to be 5.2 percent higher than the previous peak of 2008 ($106.6). |
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Source: Smith Travel Research, Jones Lang LaSalle Hotels. Shaded area is a forecast. These forecasts are not guaranteed.
CHICAGO, MAY 12, 2009 – Jones Lang LaSalle Hotels today released its first “FocusOn: Outlook for RevPAR Turnaround,” a five-year forecast indicating revenue per available room (RevPAR) will reach $68.28 in 2013, exceeding the previous peak achieved in 2007. The firm expects U.S. RevPAR to decline 12.1 percent this year, comprised of a 7.4 percent decline in average daily rate (ADR) and a 5.1 percent drop in occupancy. RevPAR is expected to bottom out in 2010, a positive indicator of upward momentum on the horizon.
Tactics to Enhance Hotel Asset Value
Structured transactions and recapitalizations, including joint ventures, preferred equity structures and sale leasebacks, will be prevalent. These structures will provide sellers with the desired initial cash proceeds and will provide the potential to capitalize on additional value at a later date.
While cost cutting is today’s modus operandi, revenue generation must remain the primary focus of any hotel operation. The balance between these two often opposing objectives may be achieved through a strategic assessment, an operating review and effective yield management.
New and evolving market dynamics, including the “AIG effect,” which reward financial austerity, have the potential to impact conventional yield-management wisdom. As the recovery gathers steam, owners need to be cognizant of expense creep and seek to delay the return of previously eliminated expenses for as long as possible.
Capital expenditures are expected to decline by 30 percent during 2009 presenting an opportunity for hotel owners with available cash to maintain or gain market share with strategic capital projects.
