Los Angeles - Hotel rates should continue to increase during the next four
years, primarily as a means to keep pace with rising costs, according to
lodging executives speaking here last week at the Americas Lodging Investment
spoken to thinks there's this gradual, ascending marketplace," Mark
Laport, president and CEO of Concord Hospitality Enterprise, told BTN. "We're looking at 1 percent
growth in supply [this year], which is still on the low side, and demand is
increasing. This is not slam-dunk, killer business, but most of us think we're
in for decent times in 2013, 2014, 2015 and even 2016." Concord manages
more than 90 hotels, largely select-service and upper upscale properties,
across the United States and Canada.
Speaking during an ALIS
roundtable, Choice Hotels International president and CEO Stephen Joyce offered
a similar sentiment. "Barring something unforeseen, we're showing a good
year—nothing spectacular, but another strong year," he said.
Analysts' data presented
at the conference backed up those projections. U.S. hotel demand in December
reached 91.7 million nights, a record for any month, according to STR chairman and co-founder Randy Smith. Demand growth has been fairly solid across
hotel tiers, and rate growth began to outpace occupancy growth about six months
ago, he said.
PKF Consulting executive
vice president Mark Woodworth said average daily rate growth would be twice the
long-term average "as far out as we can see. Not until 2017 can we see a
point where the current cycle peaks."
On a market-level basis,
rate trends will be more mixed, according to Noble Investment Group CEO Mitesh
Shah. Dallas, for example, did not grow as expected in 2012, he said.
Overall, given recent
rate increases, hoteliers said they now are nearing price levels that peaked
before the recession.
"Part of the reason
it's getting a little bit better is that it was so bad before," said
Gerald Chase, president and COO of New Castle Hotels & Resorts. "Just
this year we'll break the ADR from 2007, and we've been having cost
Some of the cost pressure
is coming from regulation, including a 2010 U.S. Department of Justice ruling,
for example, that requires hotels to provide access to their swimming pools for
people with disabilities. Distribution costs also are a concern, not just due
to existing online travel agencies but also the unknown impact of future new
"There's lots of
nontraditional competition that's going to come to bear over the next couple of
years: Apple, Google, Microsoft or whoever," said Joyce, adding that
distribution has been Choice's biggest focus during the past three years.
"What I fear most is being unprepared and getting caught by surprise."
Besides trying to push
rates higher, Noble's Shah said hoteliers would be reviewing services and
amenities carefully to maximize profitability.
"Brands need to
have a chief cost containment officer," he said. "Do we need these
concierge lines? Who uses them? Who's using the indoor pools? There are a lot
of important decisions we have to make, and we can't keep adding costs to our