2014 Bodes Well for the Continued Growth of the Lodging Industry

U.S. hospitality industry projections point to 2014 being another successful year with substantial gains in revenue and profitability. PKF Hospitality Research estimates that a key industry performance metric known as revenue per available room, or RevPAR, will increase by 6.6 percent this year and 7.5 percent in 2015. Profits, meanwhile, are expected to grow by 12.8 percent and 14.5 percent, respectively, during the next two years.

For M&R Hotel Management’s portfolio with its concentration of hotels in New York, these positive forecasts bode well. Reviewing the national data, PKF considers urban and airport hotels to be the only two industry groupings that have fully returned to their pre-recession peak levels.

Among the major urban hotel markets, New York always ranked number one, given the size and diversity of its lodging inventory. The city hosted 54.3 million visitors last year, an all-time high, according to NYC & Company, the city’s tourism promotion agency. That’s up from 52.7 million visitors in 2012.

Michael Bloomberg, who recently stepped down as New York mayor, has been a tireless booster of the city. Bill de Blasio, who took the oath of office this month, seems equally committed to keeping the Big Apple front and center as a world-class tourist destination, attractive to both leisure and business visitors, domestic as well as international.

Yet for as rosy as these forecasts may be – both local and national – projections are just that. An unexpected downturn in the economy, more dysfunction in Washington or a terrorist incident easily could affect consumer and business confidence, leading to a contraction in travel and hotel bookings.

At both the management company level and individual property level, hotels must remain vigilant when it comes to expense control and capital investments. Revenue management remains critical, including managing online travel agencies and other distribution channels. Rate is still a street-corner battle that has to be fought every day.

Consistently high occupancy, in turn, has encouraged developers to build more hotels. New York has more hotel rooms under construction (12,729) than any other of the top 26 U.S. markets. As long as demand continues to increase – and all indicators suggest it will – the increased rooms inventory will be absorbed without diluting the profitability of existing hotels.

These concerns notwithstanding, I’m confident 2014 bodes well for the continued growth of the lodging industry. Americans have come to view travel, whether for leisure or business, as a right, and the nation’s hotels and resorts stand ready to welcome them.

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