NEW YORK CITY-As REITs ramp up and group rates continue to climb, it’s been one hot summer for the hotel market. With a near $5 billion in transaction volume during the first five months of 2011 alone, big brands and big names are beginning to drive business in top-tier markets and secondary and tertiary regions once again.
But as the economy remains in flux and unemployment remains high, concerns over the stability of the industry is still on everybody’s minds post-recession. “These secondary markets didn’t get hit as hard as these urban markets had,” said David Pepper, senior vice president of global development for Choice Hotels International, during GlobeSt.com’s “New Era for Hotel Opportunities” webinar on July 27, sponsored by Choice. “The leisure traveler has stayed consistent. But now there are some world politics going on. If gas prices continue to go back up, that’s where the leisure traveler is really going to be affected.”
And while others push to incentivize development, Jonathan Bortz, president, CEO and chairman of Pebblebrook Hotel Trust, predicts that the hotel industry will see healthy travel growth as long as corporate profits continue at high levels--and continue to grow. “We had a recession that was decimated by a decline in business travel primarily and that hits the major cities the most,” Bortz said. “I think we’re seeing a reverse of that on the positive side. I think the rebound has happened much faster and it’s impacted the major cities first because that was primarily the lost business travel. Really, the other markets depend more, on overall demand growth in the long-term.”
With that, competition for trophy assets in New York City, Boston and DC is rising, said Anthony Marino, executive director of Virgin Hotels. “There are the economies in the major markets with phenomenally performing real estate and then you have secondary and tertiary markets that have a very different picture if you walk down Main Street,” Marino said.
Others are looking toward select service hotels for solid going-in yields and RevPAR growth, like Jeffrey Fisher, president, CEO and chairman of Chatham Lodging Trust. “I think when you buy your deals, what all that means is that you ought to be careful about the kind of projections at proformas you try to sell yourself or sell your board on,” Fisher says. “At Chatham, we’re looking at things in a conservative way.”
On the luxury side, Richard Holtzman, senior vice president of resorts at Pyramid Hotel Group, said boutique hotels provide a standout opportunity in an ever-competitive market. “I find it really interesting the way the big brands are working hard to get that unique experience into their portfolio,” Holtzman said.
GlobeSt.com’s managing editor Ryan Clark moderated the hour-long discussion, a joint presentation of GlobeSt.com and sponsor Choice Hotels International. To listen to a replay of the July 27 event, available on demand until Oct. 26, click here.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
