News for the Hospitality Executive |
by Geoff Davis November 2, 2012 With what is sure to be a close
and highly
contested election upon us, it would be wise to reflect on how
significant the
impact of that election could be on hotel investment in the near
future. The
hotel industry continues to recover, with robust growth in occupancy
and rate
this year. The forecast for REVPAR (Revenue Per Available Room) growth
for 2012
is forecast at approximately 7 percent. Well ahead of GDP growth and a
beacon
of hope in an economy that continues to struggle. This growth in
operating performance
has been a catalyst for increased investment activity in the hotel
sector. Our
own volume of closed transactions this year is up in excess of 80
percent over
2011. Buyers and sellers are more in equilibrium on value, and some of
the
activity is no doubt reflective of the desire to close transactions
this year. Consider the following impacts on hotel investment:
Contrary to past cycles, in
this cycle the
hotel industry seems to be leading a recovery and as such, makes for an
attractive investment opportunity. The yield on assets is there. The
ability to
buy assets at a discount and reposition them is there. Selective ground
up
development is starting to come back, but new supply remains muted,
hence
making existing assets attractive. The good news is the country needs
jobs, and
the hospitality industry has been a beacon of hope in that arena. Both
candidates recognize travel and tourism as a clean industry and a great
provider
of jobs to the working and middle class. Obama sponsored the Travel
Promotion
Act, and Romney is a former board member at Marriott. They both get
that the
hotel industry is good for America. The differences lie in the approach
to all
the items that impact both hotel operations and investment in the
sector.
Despite the outcome of the coming election hotel investors will
continue to
invest, but it could be a very different playbook next year if
regulation and
taxes dominate the consciousness of hotel investors.
About the Author: Geoff Davis is President & Senior Principal HREC Investment Advisors and may be reached at [email protected]. |
For
additional information, please contact: Geoff Davis President & Senior Principal HREC Investment Advisors [email protected] www.hrec.com |
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