In 2015, hotel sales in the United States are expected to hit $34.5 billion and globally, more than $68 billion. Within the hospitality sector, experts are highly optimistic. Regardless of the property type, whether quaint boutique type cottages with select services, beachfront resorts, or luxurious New York high-rises, fundamentals are improving.
In a statement from Michael Fishbin, global hospitality and leisure leader with Ernst & Young consulting firm, predictions for the industry for global travel and tourism consists of 3.9 percent growth this year alone. Part of that increase has to do with the recovering economy.
Fishbin adds that hospitality has always been a sector that generates jobs and maintains a significant number of employees. In fact, for gross domestic product, in the US hospitality is at 10 percent. In looking at global revenue on a per available room basis, growth this year will reach 7 percent although construction is somewhat slower because of low supply.
New Hospitality Report
Data in a new report released by Jones, Lang, and LaSalle (JLL), a commercial real estate services firm, the volume of hotel transactions globally will jump to $68 billion this year, up from last year’s number of $60 billion. The primary reasons behind the increase include more liquidly in debt markets, increased activity in secondary markets, strong demand, and a high level of single-asset trades.
The greatest share of the sales is expected to be garnered by the Americas, reaching around $34.5 billion while at the same time, hotel loans are picking up and debt is readily available. Lauro Ferroni, global head of research in the hotels and hospitality division of JJL said there should be noted upward movement in 2015.
Obviously, an increase in hotel sales within the US is great news but there are a few possible downsides.
- Occupancy Levels – Although occupancy levels are the highest seen in quite some time, near 65 percent on a national basis, a lack of new rooms is still a problem. In fact, this has impacted virtually all mature global market segments to include the US, as well as Europe.
- Construction – Currently, the number of hotel properties under construction is significantly lower than the country’s long-term average
- Supply – Average Supply increase for the United States is roughly 2 percent and while some improvement is being seen, only a slight improvement of 1 percent has been reported during the prior two years
On the upside, new hotel development was not even up for discussion three years ago. At that time, commercial construction as a whole looked extremely bleak. However, new construction is going on and while it will take up to three years to fully bring supply where it needs to be, there is upward movement.
Something else to consider is that in recent years, a number of large and lavish hotels have been purchased by Indian and Chinese investors. In addition to the money for purchasing hotels, these countries are willing to spend an exorbitant amount on making necessary upgrades. That alone has increased competition, pushing the price of hotels up 14 percent last year. Overall, 2015 should prove to be a great year when it comes to construction for the hospitality sector.