Improving market conditions have created a surprising recovery in the U.S. lodging industry which continues to enjoy gains in occupancy and pricing. Increased profits over the last two years have resulted in much greater interest in hospitality investments. The revenue per available (REvPAR) for U.S. hotels will rise 5.8% in 2012 according to PKF Hospitality Research. U.S. markets saw declines in revenue per available room in 2009, however, occupancy rates increased and turned positive in 2010 resulting in a sustained recovery since the end of 2009, 2010 and 2011. Occupancy has grown steadily for 2 years reaching 60.1% in 2011 and STR forecasts 60.4% occupancy in 2012 and 60.7% occupancy in 2013.
Although hotels have seen an increase in occupancy since the end of 2009, room rates have been slower to recover. In 2008 the ADR for hotel rooms peaked to $107.39 after which it declined to approximately $98 in 2009 and 2010. Since then the ARD have recovered to $105.45 and is expected to future increase to $110 in 2013.
The investment market in lodging is increasing as potential buyers attempt to acquire assets priced well below recent peaks. Occupancy in 2011 was higher than ever before and it appears that demand will increase in upcoming years as both leisure and business travel continues to increase.
Particular interest in select service transactions are serving to capture investor’s attention as capital continues to flow into lodging according to Jones Lang LaSalle Hotels which forecasts a 2012 volume of select service hotel portfolio sales will likely double over 2012.
As the demand for hotels hits record levels, the ripple effect will be created in many sectors of the economy including Denver office space for lease and Denver real estate. It is unclear at this juncture the extent to which the increase in lodging investment will immediately impact commercial real estate in Denver, however, it appears likely that this will have a positive long-term effect in the overall Denver real estate market.
Luxury hotels have seen the greatest gain in room revenue apparently reflecting that upper scale business and leisure travelers will typically not cut back on high end lodging. Luxury is now leading the industry allowing operators to gain from their various consumer markets; it is estimated that the national occupancy for hotels in each of the upper tier chains will exceed 70% through 2016. The long-term effect that the lodging sector will have on commercial real estate is uncertain but will remain a vital factor in the recovery of Denver real estate.