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Optimism Reigns at ALIS

Optimism Reigns at ALIS

At the 2014 Americas Lodging Investment Summit (ALIS)—which brought more than 2,600 hotel industry executives, owners, and investors to the JW Marriott Los Angeles L.A. Live in California—the outlook for 2014 remained overwhelmingly positive.

Following a year of record-breaking statistics for number of rooms sold and room revenue, most conference attendees agreed that the industry is poised for another year of substantial growth.

But as Jan Frietag, senior vice president of strategic development at STR, took to the stage for a panel presentation on Jan. 28, he revealed a slightly different forecast for RevPAR and ADR growth than the forecasts from other data firms. And in a keynote presentation economist Kevin Warsh, a former member of the board of governors with the Federal Reserve System, also presented a tempered take on the economy.

“There’s now a remarkable consensus that this is a breakout year,” Warsh said. “But we should balance that hope with experience. I’d be surprised if the economy bursts out to the upside. Risks are highest when measures of risks are lowest.”

A Mostly Bullish Outlook
For the first time in the past few years, data firms STR and PKF Hospitality Research shared differing opinions about where RevPAR and ADR are headed in 2014. Mark Woodworth, president at PKF Hospitality Research, believes 2014 RevPAR growth will shoot to 6.6 percent, up from 5.4 percent in 2013. “I happen to think it’s going to be a terrific year,” he said.

Woodworth also predicted that the cycle hasn’t yet peaked and expects RevPAR growth in 2015 to be 7.5 percent. PwC US also revealed a similar forecast, predicting that RevPAR growth in 2014 would reach 6 percent.

But Frietag showed a less robust outline for the next few years. STR is expects RevPAR growth to fall slightly in 2014 to 5.3 percent and to drop even further in 2015 to a growth rate of 4.7 percent. Frietag also believes ADR growth will remain flat at 4.2 percent, with the luxury and upper upscale properties outperforming other sectors. “Demand is strong. RevPAR growth is still there,” he said. “We’re just not going to see the numbers we’re used to.”

But the return of the capital markets, the increased interest in development, and a strong transaction outlook buoyed opinions from other conference attendees.

“We don’t think the political environment is going to be particularly favorable for a while,” said Steve Jennings, principal at Deloitte Travel, Hospitality and Leisure. “We’re not skyrocketing up, but we do think the industry is coming back. It’s going to show in occupancy and RevPAR. And there’s no doubt that the capital markets are firming up.”

Mark Laport, chief executive officer of Concord Hospitality, says his company has a robust pipeline with eight projects expected to open in 2014 and seven more in development. The company expects to hit the $1 billion mark in development spend by the end of the year. “The pendulum has swung to a lot more development,” Laport says. “It’s a great time to put deals together. It’s almost getting to good. We’re seeing a lot of other developers come out of the woodwork.”

The transaction market is another factor that is expected to remain strong. Suzanne Mellen, senior managing director of consulting and valuation at HVS, said 2013 was a banner year for hotel deals, with total volume reaching $25 billion. Although that figure remains below the peak level of $33 billion in 2006, Mellen expects 2014 to meet or exceed last year’s level, with big-money deals coming back with renewed force.

Advocacy and Travel Promotion
Another major focus at ALIS included a strong push for advocacy in Washington, in the face of the Affordable Care Act’s rollout and the increasing efforts by President Obama and state governing bodies to raise the minimum wage for employees.

The 2014 agenda outlined by AH&LA’s Katherine Lugar calls for revisions to the new healthcare law, less onerous labor regulations, the passage of immigration reform, and a better visa waiver system to attract inbound international travelers to the United States. The association is also focused on educating Congress and the Administration about the strength of the industry and sharing the compelling narratives of hoteliers across the country. AH&LA will also be stepping up efforts to make sure state and local governments collect the full amount of room taxes from online third-party groups when the rooms are booked through their sites.

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