News for the Hospitality Executive
2012 US Hotel Valuation Index (HVI):
October 2012 - Stephen Rushmore, Jr., President and CEO of HVS, the leading global hospitality consulting and services firm, has announced the publication of the 2012 U.S. Hotel Valuation Index. The Hotel Valuation Index (HVI) tracks hotel values in 66 individual U.S. markets and the United States as a whole. The HVI looks at hotel supply, demand, occupancy, and average rate trends for each market area and creates an income-and-expense projection based on local operating costs.
According to Katharina Kuehnle who co-authored the HVI with Stephen Rushmore, Jr, “Increases in occupancy, average rate, and demand, along with limited growth in supply thus far in 2012, are anticipated to result in relatively strong growth in net operating income (NOI). These improving dynamics, coupled with a fewer buying opportunities, are expected to yield a positive per-room value change for the U.S. in 2012.”
In 2011, the U.S. average change in per-room value equated to an increase of nearly $13,000 over 2010; this value change has resulted in the U.S. ranking 33 out of the 66 total markets reviewed. Ranking first in 2011, with the most significant per-room value increase was Miami, closely followed by San Francisco. Ranking last in 2011, with the most significant per-room decline were Santa Fe and Tucson.
“As the U.S. economy continues to recover, relatively strong increases in demand in the meeting and group segment are expected,” continues Kuehnle. “Therefore, values on a per-room basis for the top three convention cities—Las Vegas, New Orleans, and Tampa—are anticipated to increase the most in 2012.”
“Moreover, Chicago and Nashville are listed under the top ten cities that are expected to realize strong growth. As Tucson’s recovery is lagging behind most U.S. markets, Tucson is expected to increase most in value through 2016. As San Francisco’s and Boston’s per-room values recovered in 2010 and 2011, the upside potential through 2016 is limited; therefore, San Francisco’s per-room value is anticipated to experience a slight decline, whereas Boston’s per-room value is anticipated to experience only minimal growth by 2016.”
Added Rushmore, “According to this 2012 HVI, U.S. hotel values peaked in 2006 at $100,000 per room. The low point during the recent downturn occurred in 2009, when values dropped to $56,000 per room. HVS projects that U.S. hotel value growth will persist through 2016, surpassing 2006 values in 2013.“
Rushmore advises investors to “sell properties in San Francisco, Boston, and Washington, D.C. this year,” whereas he suggests investors “sell properties in New Orleans, Atlanta, Chicago, Philadelphia, and Cleveland in 2013.”
For a limited time, one can download a complimentary copy of the 2012 HVI, at www.hvs.com/Bookstore/#2012USHVI.
The HVI looks at hotel supply, demand, occupancy and rate trends for each market area and creates an income and expense projection based on local operating costs. It then capitalizes the resulting net income by an appropriate capitalization rate, which produces an estimate of value for a typical hotel in that market. The HVI tracks historical hotel values back to 1987 and projects them out to 2015. This tool shows the high and low points of each cycle, the velocity of the declines and recovery, and the overall value volatility of each market. HVS is the only hotel consulting firm that provides value trends for individual markets, which compared to REVPAR data, are significantly more useful to hotel owners, operators, and lenders.
HVS is the world’s leading consulting and services organization focused on the hotel, restaurant, shared ownership, gaming, and leisure industries. Founded in 1980, the company performs more than 2,000 assignments each year for virtually every major industry participant. HVS principals are regarded as the leading professionals in their respective regions of the globe. HVS is client-driven, entrepreneurial, and dedicated to providing the best advice and services in a timely and cost-efficient manner. Through a worldwide network of more than 30 offices and 400 seasoned industry professionals around the world, HVS provides and unparalleled range of complementary services for the hospitality industry.
Leora Halpern Lanz