Yesterday I attended the opening session of The Americas Lodging Investment Summit (ALIS) in Los Angeles, and I wanted to share some early themes from the convention. Attendance at the conference is back up to 2,500 (similar to 2007), which some attendees see as a sign that optimism has returned to the market.
• Revpar increase is expected to continue in U.S. in the upcoming year – in other words, hotels should continue to improve on profitability.
• There’s a general feeling among attendees and speakers this is the year development will be coming back.
• There’s a very limited supply growth (smaller number of projects in planning stages than in the past)
• Demand growth exceeds supply growth (for the past 2 years)
• There’s a low percentage of new supply expected to continue through 2016
Hotel development tends to lag several years behind hotel industry trends. This makes sense given the time required to develop a hotel through permitting, planning, and construction (not to mention financing, management agreements, etc.). Right now, hotels have once again become profitable investments (with returns similar to other real estate, such as offices and apartments).
The CEO panel (with presenters from PwC, Accor, Choice, AEG, and Noble Investments) expects the conversion business to be strong over the next two years, with new development gradually increasing. The expectation is that new build supply will be increasing in 2015 / 2016.
In addition to a more positive outlook on potential development, there was also discussion that capital expenditures need to catch up from slow down over the last five years. In order to satisfy customer expectations, hotels need to continually improve their properties. With increased demand and improving revenues, renovations and new construction in the hotel sector should continue to improve.