Dwindling Supply, Increased Demand Highlight Hotels

HOUSTON—According to Marcus & Millichap Real Estate Investment Services’ Hospitality Research Quarterly Update, the hotel sector continued benefiting from extraordinarily constrained supply and rising demand during Q2 2012. Interestingly enough, though occupancy was reported at 61% (versus 60% during the same period of 2011) and the ADR’s annual change was 4.3% above where it was a year ago, demand growth was at 2% (versus 5% year-over-year) and revenue growth stood at 6.4%, down from 8.9% from the year before.

But don’t panic, says David Luther, vice president and national director of Marcus & Millichap’s National Hospitality Group. It’s not necessarily a bad thing that revenue growth and demand growth are lower. “They were so low in 2009,” he explains. “As things picked up in 2010 and 2011, we frankly experienced abnormally high growth in demand and RevPAR. These will be normalized as we move forward.”