LOS ANGELES—The hotel market has hit its peak after a phenomenal 2015, according to research experts on the Let the Numbers Speak—Where's the Peak panel at the opening of ALIS this week. However, that wasn't bad news. The experts—Arthur Adler, managing director and CEO Americas at JLL; Jan Freitag, SVP at STR; and Mark Woodworth, senior managing director at PKF-HR, a CBRE company—said that this peak is more like a mountain range, and we can expect to stay on top for some time.
"We are at the peak, but we are going to stay at the peak," Woodworth said on the panel. "The outlook measures are terrific."
While the sentiment is still strong, it is less bullish than it was even 90 days ago. In an earlier forecast, Freitag's firm predicted 6.1% revPAR growth in 2016 and 5.8% revPAR growth in 2017. Now. three months later at the conference, his prediction dropped to 5.5% revPAR growth in 2016 and 5.6% revPAR growth in 2017. The moderator, W. Edward Walter, president and CEO of Host Hotels & Resorts, questioned if a peak existed. Freitag said that mathematically, there has to be a peak. "The question is how long will we stay at the top?"
According to Adler, transaction volume and occupancies have peaked, as well as primary markets; however, he said that secondary markets have more runway left. In 2016, he also said there will continue to be abundant liquidity in the market, with private equity providing even more liquidity. While he had a positive outlook for the year ahead, he noted that the growth rate is slowing. It is now at 5%, which is great, but it was at 8%. Adler also saw an evolution in the hotel transactions market. He believes that hotels will become a tradable asset class, like an office building.
The volatility in the global economy and in the stock market since the beginning of the year has contributed to some of the caution from the panelists, however, Adler also estimated that this volatility might bring more investment in commercial real estate, a safer asset class.
In all, the panelists expect another strong year, even as the growth rate begins to taper.
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Kelsi Maree Borland
