Burba Hayes Hotel Trend Report

Hotel Trend Report

Survey Says: Another Year of Steady Improvement for Hotel Investment

The survey results from the Americas are in, and the hotel investment outlook is looking pretty decent throughout North America.  It is not off-the-charts spectacular, but it is steady, positive, and there is a respectable outlook for the future.

To understand the perspective of the investment community and how the region stacks up comparatively, we asked the survey respondents to tell us if they thought the industry today was more lucrative, less lucrative, or the same as it was ten years ago.  The clear winner was Central America, where over half the responses were that this region was ‘more lucrative.’  On the opposite end of the spectrum was the Caribbean, where nearly half the respondents felt the region was ‘less lucrative’ today.  The development of more stable political and economic environments in Central America, coupled with the efforts of the individual countries to attract tourism and investment, no doubt, are beginning to pay off as investors and hoteliers discover these new markets.  Costa Rica and Panama have received much of the early attention and investment, but El Salvador, Guatemala, Honduras, Nicaragua, and Belize are increasingly making themselves seen as places to invest.

The Caribbean on the other hand is a deeper and more mature hotel market, and is still working through some of the overbuilding/investment challenges from the last real estate boom that ended in 2008.  Thus, the Caribbean is seen as the least lucrative region when compared to its neighbors.  The same survey question was asked a year ago for HIO, and the results for the U.S., the Caribbean, and Mexico suggest a better outlook or slightly ‘more lucrative’ climate for all three regions this year.

Another significant finding was the growing belief that development activities were going to increase throughout the region as more money was going to be made available for new construction.  In all five surveyed regions, more than half of the respondents believed ‘more money’ would be made available for construction in 2013 versus 2012.  The U.S. was the clear leader in its ‘enthusiasm’ that development was coming back, with 80% of respondents expecting more, not less money coming available.  At the low end of the survey results was the Caribbean with nearly 50% of the respondents believing that there would be no change, or a decrease in the amount of money available in 2013.  The U.S. outlook is more positive then was indicated in a similar survey a year ago when 66% expected more money to be available.  The development outlook in the Caribbean and Mexico softened slightly when compared to the same survey last year.

The survey also asked ‘how confident’ were the respondents that investment opportunities in the five regions would be greater in 12 months then they are today.  In every market, the overwhelming majority (77% or greater) were somewhat confident or very confident that there would be more investment opportunities one year from today.  The strongest optimism came from the U.S. and Central America, with Canada being the most cautiously optimistic.  Even in the Caribbean, 77% were either somewhat confident or very confident that investment activity would increase.

What is driving the generally positive outlook?  There is no shortage of conversation about the large amount of equity looking for places to invest, and with the lending community largely on the sidelines after 2008, any movement lenders make is an improvement.  Plus, the improving industry fundamentals have not gone unnoticed.  With the lack of new supply and the improvement in the regional economies, the ‘hotel numbers’ continue to get better.

A survey question posed about RevPAR growth expectations over the next twelve months showed positive RevPAR expectations across the region.  The outlook in the U.S. is the most positive (92% expect positive growth in RevPAR), followed by Canada (81%), Mexico (78%), Central America (77 %), and the Caribbean (73%).  Where data from last year is available, the RevPAR outlook is slightly lower than it was a year ago, but respectable none-the-less.

Influencing the positive outlook in North America was the fact that 85% of the respondents expect their company to grow in 2013.  This is slightly lower than the answer to the same question from a year ago where the answer was 90% as seen in the table below.  So like many of the numbers reported in the survey, there is a good and solid outlook, but just a bit tempered from last year.

Hot Spot Cities for Hotel Development

We asked what cities were ‘hot’ spots for investment in 2013 and the top five cities were: New York, Los Angeles, Rio de Janeiro, San Francisco.

Outside the U.S., Mexico City came in at number 7, Panama City at number 10, followed closely by Bogota at number11.

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