The U.S. hotel market is showing signs of improvement, according to a new report from Lodging Econometrics (LE). In Q1 2010, hotel operations showed continued improvement, with more positive gains in demand and occupancy than initially expected. With increasing demand, room rates should begin to improve in Q2, causing RevPAR to register positive gains and putting the industry more firmly on the road to recovery, the research firm says.
LE also projects that distressed real estate loans will begin to be resolved at a faster pace, and many owners are reporting operating profits. "With many assets coming to market at discounted prices, there should soon be a wealth of opportunity for investors who can access debt and/or equity," LE states in a press release.
In addition, LE’s forecast for new hotel openings puts gross supply growth for 2010 at 1.7 percent, which is less than other industry predictions. The company projects 715 hotels/ 80,830 guestrooms will open in 2010. This is a dramatic fall-off from 2009, down 54 percent by hotels and 55 percent by rooms. In 2011, LE expects 654 hotels/63,141 rooms to come online. Seven consecutive quarters of rapid pipeline declines are having a substantial impact on the number of new hotel openings going forward. With less supply to be absorbed, growing demand should lead to faster room rate improvement and further accelerate the industry’s recovery, LE notes. What’s more, at 3,395 projects/396,797 rooms in Q1, the total construction pipeline has fallen below 400,000 rooms for the first time in four years.
