Optimism prevailed at the 2013 Americas Lodging Investment Summit, which was attended by nearly 2,500 industry leaders this week in Los Angeles. The theme, “On with the Show,” rang especially true, as demand growth continues to outpace supply, revenue per available room (RevPAR) is expected to grow, and transaction volume increases. According to STR data, a record of 91.7 million room nights were sold in the U.S. in December.
Hotel executives who spoke during the opening sessions shared their bullish outlooks for the year ahead. Mit Shah, CEO of Noble Investment Group, said demand outpaced expectations in 2012, as business transient customers viewed travel as more of an investment as opposed to discretionary spend.
Shah still expects there will be some give and take with businesses in 2013. Noble will be putting a lot of stock in the request for proposal process and obtaining rate premiums, but pricing will ultimately be determined on a market by market basis. “We want people in our hotels to be able to take risks in terms of pricing because that’s really where the momentum is going to come from,” he said.
As employment rates improved, leisure business bounced back for Choice Hotels in 2012, said the company’s CEO Steve Joyce. Choice experienced a strong summer that continued into fall, he added, and development was up significantly each quarter. He expects the industry to regain RevPAR in 5, 6, and 7 percent increments in the next three or four years. “Barring something unforeseen, we should have a pretty good year.”
Robert Gaymer-Jones, CEO of Sofitel Worldwide, said Sofitel had the highest single digit growth in RevPAR globally, mostly driven by rate. Rates are back to 2007 levels at the majority of the 123 Sofitel hotels around the world, he added, with Southeast Asia and Europe performing particularly strong.
“We feel very bullish in our sector of the industry,” Gaymer-Jones said. “Across the globe, except for when you have some hiccups like the Arab Spring and the impact of Egypt and a few locations like that, we feel pretty good about it and 2013 will be a continuation.”
Former Starbucks CEO Jim Donald, now CEO of Extended Stay Hotels and a newcomer to the industry, spent the bulk of 2012 visiting about 40 percent of the portfolio. He realized that the company had basically been left alone for nearly a decade without any capital invested into it. “Of all the companies I’ve been with, with the exception of Starbucks, I’ve never had a company that had such an opportunity in pricing,” Donald said. “Once you put capital with it, all that’s needed then is the day-to-day service that differentiates us from those that we compete with.”
In terms of how government regulations, such as the new health care legislation, will impact the bottom line, Shah says it’s a matter of wait and see. “We’re confronted with a lot of different challenges in our business and regulation is just simply one of them,” he said. Factors such as how new supply will translate into true pricing opportunity and upcoming capital expenditures need to be considered too. “This is a real time in our industry where we have to challenge how we operated in times past and is it the way to operate going forward?” Shah said.
Joyce said brands have an obligation to help involve their owners in a concerted effort to communicate with legislators as health care, labor, and other issues loom large. Joyce said the threat is as great as ever for regulations that would be disruptive and add more costs for businesses, such as efforts to unionize hotels. On the positive side, he said strides are being made to increase the number of foreign travelers to the U.S. through the expansion of the visa waiver program.
“We need a regular ongoing dialogue where we are seen as a powerful force in Washington that’s supportive when things go the right way,” Joyce said, “but that punishes when things go the wrong way.”