Industry & Brands

2015 Looks Like Another Good Year for Hotels
confetti flying through the air on New Years Eve 2015 at Times Square

Image: @timessquarenyc via Instagram

Those of us who have worked in hospitality long enough know the business is cyclical due to market forces of supply and demand. Fortunately, we have enjoyed several strong years as the economy rebounded from recession, and we are looking forward to another year of healthy growth in occupancy and rates.

The midscale segment — where most of M&R Hotel Management’s hotels operate—performed well in 2014 and is expected to continue to perform strongly this year. PKF Hospitality Research says revenue per available room, or RevPAR ̶ an indicator of profitability ̶ jumped 7.8 percent in 2014 and will grow another 5.5 percent in 2015.

Holiday Inn Staten Island front desk and waiting area with couches

Holiday Inn Staten Island

M&R has benefited from the up cycle as owners seek expert management for their new and existing hotels. We recently opened the newly constructed Holiday Inn Staten Island in our home market of New York and expanded into the Boston and Caribbean markets as operator of the Holiday Inn Express Braintree and Alegria Resort in St. Maarten.

Alegria Resort, St. Maarten guest bedroom

Alegria Resort St. Maarten

During the last 10 years, M&R Hotel Management has built a reputation for managing hotels efficiently, delivering excellent guest service and driving sales and revenue. While I’ll take an up cycle over a down cycle any day, I am confident our commitment to performance and quality and service will prevail in any economy.

Brand Conferences Bring Together An Industry Community

Annual brand conferences afford hoteliers a firsthand opportunity to learn about planned upgrades and initiatives. But such conferences can present another, even more valuable opportunity.

I, along with a number of M&R general managers and senior executives, attended the annual InterContinental Hotels Group conference several weeks ago. As manager of three Holiday Inn and four Holiday Inn Express hotels, we are affiliated with IHG’s largest, most widely recognized brands.

The IHG team shared exciting design and food and beverage initiatives including a gourmet dinner concept, upgraded breakfast and stylish Holiday Inn Express guest room décor known as Formula Blue.

It’s gratifying to see the brand teams at IHG working hard to innovate, which helps keep us ahead of the competition.

Our general managers took advantage of the conference to network with their counterparts at Holiday Inn and Holiday Inn Express hotels from around the world.

Tracey Rucks, general manager of our Holiday Inn Express Manhattan Midtown West, for example, said she appreciated the chance to “share notes and trade best practices.” Challenges in one region, after all, are likely to be similar to challenges in other regions, she observed.

Returning to their properties, our managers share what they’ve learned with their team members. The conference is a reminder that we’re all part of a larger industry community.

The Lodging Industry’s Glass Is Half Full

Lodging industry executives have every reason to be positive this year.

The U.S. hotel industry this year is expected to report a 4.2 percent rise in average daily rate to $115, a 5.7 percent gain in revenue per available room (known as RevPAR, a key measure of profitability) and a 1.4 percent increase in occupancy to 63.1 percent, according to Smith Travel Research, which tracks industry performance.

Speaking last month at the 36th Annual NYU International Hospitality Industry Investment Conference in New York, STR president & Chief Operating Officer Amanda Hite described the industry’s projected growth in 2014 as “robust” and discounted fears that supply growth will now accelerate to the point where it outweighs demand growth. STR forecasts that U.S. lodging demand will increase 2.6 percent this year, while supply is expected to grow by only 1.2 percent.

M&R Hotel Management shares STR’s optimism. Our hotels are mostly in the midscale and upper-midscale industry segments. These segments are among the most popular with consumers, especially value-conscious business travelers and families attracted to the complimentary Wi-Fi, breakfast and shuttle service many of our hotels offer.

M&R benefits from operating hotels in the thriving New York market, which has seen record demand from leisure and business travelers, both domestic and international. The city had a record 54.3 million visitors last year of which 11.4 were international, according to NYC & Co., the city’s tourism development arm. This year, the number of visitors is expected to hit 55 million.

Granted, the lodging industry is notorious for being cyclical, and the 2008-2009 downturn was one of the most severe many industry veterans had seen. But all signs suggest we’re back – or close to back – to pre-recession performance levels and that we only at at midcycle, which means we have a good chance of having three to five more good years ahead.

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.