Marcus & Millichap Says Hotels Rising

CHICAGO—The slowly rising economy has begun to buoy the hospitality sector and the nation’s hotels will see higher occupancy and room revenue the rest of this year, according to a recent Hospitality Research Quarterly Update from Marcus & Millichap. The burgeoning energy sectors in states like Oklahoma, Colorado and Texas will provide a notable lift to hotels, while the strengthening auto sector will do the same across the Midwest. Although future cuts in government spending remain a concern, its effect on spending and travel by government employees and contractors remains uncertain, the firm’s researchers found. In fact, recent earnings calls by major hotel companies showed that whatever the slowdown in government travel spending, it was off-set by increased business from other customers.

“Fresh indicators of a strengthening economy have emerged in 2013, lifting prospects for additional gains in room demand and room revenue in the months ahead,” the quarterly update says. “The planning pipeline has grown over the past year, and the number of rooms under construction rose more than 18% during that time.” Actual deliveries, however, will only expand the nation’s room stock by 1.5%. Therefore, Marcus & Millichap foresees that a “record room demand and a nominal increase in completions will support a 60 basis point rise in nationwide occupancy to 62% in 2013.” Furthermore, “room revenue will rise 6.9%.”