Stability–But Caution–in Hotel Sector
The hotel sector continues to display stability, “but with a dose of caution regarding future growth,” said US Realty Consultants, Columbus, Ohio.
US Realty Consultants Principal and Managing Director Jeffrey Walker said average daily rate growth expectations are down significantly from a year ago. “For both full-service and limited-service hotels, overall average daily rate growth expectations are only slightly higher than expense growth expectations,” he said.
Discount rates–the yield rate applied to hotel cash flows to arrive at the market value–were largely flat since US Realty Consultants’ last survey six months ago, with full-service hotels increasing 20 basis points and limited-service hotels improving by 20 basis points. Capitalization rates for both full-service hotels and limited service hotels decreased by a “modest” 10 basis points to 7.5 percent, Walker said.
Looking at advance reservations, TravelClick, New York, said fourth-quarter data show “healthy” gains across the board despite slight declines in average daily rates and bookings in the third quarter. Average daily rates fell 0.5 percent and bookings slipped 0.2 percent, respectively, during the third quarter.
TravelClick examined group sales commitments and individual reservations in the 25 largest North American markets for hotel stays booked by September 1 for the period between September 2017 and August 2018. While group travel bookings fell 4.6 percent during the third quarter, the segment’s advance reservations are up 3.6 percent for the fourth quarter. Similarly, transient business travel bookings fell 0.3 percent in the third quarter, but are up 0.9 percent in the fourth.
“Over the past 60 days, there has been a noticeable increase in advance reservation pace, lasting well into 2018,” said TravelClick Senior Industry Analyst John Hach. “This uptick is welcomed news for hoteliers who have endured inconsistency throughout most of 2017.”
Hach said a number of markets currently face “unforeseen” challenges. “Especially those affected by recent weather events. It becomes even more important for hoteliers to carefully analyze their advance reservation patterns during these upcoming months. These disruptions will undoubtedly alter the transient segment in particular, especially in top destination vacation markets in Florida and throughout the Caribbean.”
Hach noted average daily rates are up 1.0 percent and bookings are up 3.8 percent in the fourth quarter across all travel segments. “This is encouraging data to round out the year,” he said.
