News for the Hospitality Executive
Zacks Equity Research Provides U.S. Hotels & Lodging
CHICAGO, Aug. 15, 2012-- Today, Zacks Equity
Research discusses the U.S. Hotels & Lodging, including Morgans
Co. (Nasdaq: MHGC),
Red Lion Hotels Corporation (NYSE: RLH),
Wolf Resorts Inc. (Nasdaq: WOLF),
Starwood (NYSE: HOT) and
Marriott (NYSE: MAR).
In the U.S., Smith Travel Research noticed growth of 3.5% in demand and an upside of 0.4% in supply during the second quarter of 2012. The firm expects the same trend to continue in the second half of 2012, but at a slower pace. In the U.S., PwC expects supply in 2012 to inch up 0.5% but demand to increase 1.8%.
Room rates are on the rise in an environment
marked with higher demand and
lower supply, thus resulting in RevPAR growth in 2012.
According to data published by Smith Travel Research in June, the total active U.S. hotel development pipeline comprises 2,741 projects totaling 296,333 rooms, down 6.7% year over year. Among the chain scale segments, Luxury reported the largest increase in rooms in the total active pipeline, with 6,358 rooms (up 54.4%). Among the rooms under construction, the upscale segment reported the maximum increase of 52.9% with 18,692 rooms.
Toward Asset-Light Model: Since late 2010, transition to an
light" business model has gained prominence in the hotels and REIT
industries. Asset sales remains a long-term strategy to strengthen
flexibility, which help companies grow through management and licensing
arrangements instead of direct ownership of real estate. A higher
of management and franchise fees reduces earnings volatility and
more stable growth profile.
Hence, the hoteliers are focused on
rebalancing their portfolios by increasing
contributions from managed and franchised hotels. This fee-based
attractive as growth is powered by multiple sources like RevPAR growth,
additions and incentive fee escalation. The business is also capital
as owner/developer partners provide the capital and the company earns a
managing/franchising the property.
Following the industry trend, many industry players like Morgans Hotel Group Co. (Nasdaq: MHGC), Red Lion Hotels Corporation (NYSE: RLH), Great Wolf Resorts Inc.WOLF) and Starwood (NYSE: HOT) embarked on an asset disposition strategy.
Acquisitions: According to Jones Lang LaSalle, hotel operators
becoming proactive on the acquisition front, a trend which emerged last
and gaining momentum in 2012. Hotel operators are presently focusing on
assets, mainly to aid brand development, in a small number of key
Consistent with this trend, industry behemoth Marriott (NYSE: MAR)
a definitive acquisition agreement with Gaylord Entertainment Co for an
payment of $210 million in cash by October 2012. Increased Capital Expenditure
on Renovation: Most of the hoteliers are increasingly investing
renovations in recent times. Hotel companies are working hard on guest
satisfaction to enhance their position in a cut-throat environment.
conversion and remodeling has emerged as a trend for major hoteliers.
industry biggies like Starwood, Marriott and others have tread the same
There are several well positioned, older
hotels in metro markets, which are
good candidates for restructuring. Hence, we believe that 2012 will
witness further renovations.