03 Mar 2018

Is Your Hotel Ready to Capitalize on Continual Industry Growth?

Luxury hotel receptionThe U.S. hotel industry will continue its growth momentum from 2017 based on occupancy, average daily rate (ADR), and revenue per available room (RevPAR), according to STR and Tourism Economics’ outlook.
The expected increase in these three key performance metrics should prompt hotels to invest more in different products and services, ranging from better online platforms to an electronic paging system.

Performance Metrics

Hotel occupancy in the U.S. will rise 0.3% to 66.1%, while ADR and RevPAR will increase 2.4% to $129.77 and 2.7% to $85.82, respectively. STR and Tourism Economics’ outlook aligned with PwC and JLL’s own forecast for the hotel sector this year.

PwC expects occupancy to reach its highest level since 1981, driven by economic growth and the federal government’s tax reforms. Arthur Adler, Americas chairman at JLL’s Hotels & Hospitality Group, said that investors have become more optimistic about business prospects. This improved confidence stems from the favorable RevPAR trends and a buoyant stock market, among others.

Relaxed Lending Standards

Businesses that plan to finance their expansion this year will also find it easier to do so, given that lenders have lowered their guard against lending money to hotel businesses. STR’s Hotel Lender Survey of 61 senior balance-sheet lenders, CMBS lenders and subordinate debt lenders showed that they have become more optimistic on the industry’s short-term growth prospects.

The survey’s respondents accounted for most of hotel financing in the U.S. in 2017, when loan balances amounted to more than $10 million. Joseph Rael, STR director of financial performance, said that many lenders think that “asset values are near the peak”, but more of them have a favorable outlook for this year.

Hotel companies in the industry should assess their current operations and find out if there is room for improvement. What is your business strategy for 2018?

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