If 2009 was the pit of despair for the hotel industry, 2012 provides more than a ray of hope. Development seems poised to increase, and industry professionals are ready to take advantage of the next wave of momentum...

At least, that seemed to be the generally upbeat mentality at Real Estate Forum’s Hotel Investor Roundtable, which took place during the annual New York University Lodging and Investment conference at the Marriott Marquis in May. The conversation pulled a wide range of perspectives from some of the industry’s top players.

The panelists’ optimism is firmly based in fundamentals. Lodging demand is growing faster than US GDP and room rates are growing faster than CPI. The most recent forecast from PKF Hospitality Research anticipates that RevPAR will increase 4.9% before the year ends.

And while this is less than the 6.9% predicted by PKF for the year’s first quarter, Gerald Chase, president and chief operating officer of New Castle Hotels and Resorts in Shelton, CT, stated that the industry will experience “good occupancy and rate growth over the next couple to three years.”

Paul Sacco, senior vice president with Boston-based Pyramid Hotel Group, piggy-backed on that sentiment: “A lot of that has to come from ADR growth because in many markets, occupancy is back up pretty high.” This uptick, along with continued business travel and group bookings, will be important, he said.

On the other hand, Leland Pillsbury, co-chairman and CEO of Thayer Lodging Group in Annapolis, MD, believes that demand for the next three years beginning in 2013 will grow three times as much as GDP and that room rates will triple CPI. On top of that, very little new supply should be added to the market.

But no matter how long it takes, the group agreed that growth is coming. Troy Furbay, executive vice president of acquisitions and development with New York City-based Loews Hotels, believes the fundamentals support this. It’s a view echoed by Mark Laport, president and CEO of Concord Hospitality Enterprises Co. in Raleigh, NC. “There’s a surprising amount of geographic focus concerning new development in a few top markets, with very little development occurring elsewhere,” he said. He feels that the East and West coasts are showing more robust growth than Middle America.

Wherever growth is focused, it will not be by market alone, and panelists think greater creativity is called for on the part of those in the hotel industry. “A hotel needs to stand on its own merit and not rely, for example, on branded residential along with the hotel,” Sacco said. “The ‘build-it-and-they-will-come’ scenario no longer exists, and properties need to be developed in areas where there’s already a strong foundation.” He cited corporate presence and built-in demand to provide anchors, in a sense, for future hotel projects...

...For the rest of the story, visit the July/August issue of Real Estate Forum.

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