The goodfrom New York University’s Lodging Industry Investment Conference, which convened in Manhattan earlier this week, is that the hospitality industry probably won’t get much worse. Occupancy will creep back up, RevPAR should follow suit and pretty soon people will be traveling the way they did before the recession.
On Monday, HVS International president and founder Stephen Rushmore offered his projections to a crowded ballroom. Rushmore identified little new supply growth, along with the end of the war in Iraq, as two positive developments for the lodging sector.
"And when occupancy starts to rebound, look for rapid growth in room rates," said Rushmore. Once room rates start to climb, he believes that property values will follow.
During 2000, most U.S hotels saw their property values peak, thanks to a furious pace of business. In fact, San Francisco hotel property values declined 32% between 2001 and 2002. New York City and Boston posted 40% drops between 2000 and 2001, according to HVS, with only five of the nation’s 10 most expensive markets posting positive value growth. Rushmore projects that New York City hotels will see the sharpest increase in value over the next few years, but won’t hit year 2000 levels until 2007.
According to Rushmore, Manhattan hotels will experience $149,000 worth of growth per room value between 2002 and 2006. Oahu, Hawaii, came in second at $140,000. Detroit was at the bottom of the list with only $3,000 of average growth per room.
Rushmore also said that Baltimore, San Antonio and Las Vegas are good buying opportunities now, while former tech bastions San Francisco, Austin and San Jose have plenty of selling opportunities. He advised caution with Detroit, Salt Lake City and Cleveland.
In closing his discussion, Rushmore said that the balance of 2003 should see an uptick in major hotel transactions. And next year he predicts roughly 200 major transactions — a steep climb from 2002’s total of 102 transactions. "Now is the time to position yourself for a strong recovery," he said.