From a small northwestern observatory…

Finance and economics generally focused on real estate

Hospitality…. on the mend?

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Following up on my previous post, Marcus & Millichap’s Hospitality report also hit my desk this week. They would posit that, “In fact, a recovery in the sector has already begun.” The projected nationwide occupancy of 51.6% in the 1st quarter topped 1Q-2009, but is still lower than the 57.7% 1st quarter average from 2005 – 2009. The primary drivers? Strengthening of the labor market and other key economic measures.

Hotel investments, however, are still waiting to mend. Sales of branded full-service hotels have declined 60% in the past 12 months, and sales of chain-affiliated, limited-service hotels are down 48%. The flight-to-quality which is evident in other sectors has yet to catch on in hospitality. Well capitalized buyers appear to be ready, but there is a gap between buyer and seller expectations. Room revenues continue to improve, but the physical condition of some assets (a result of deferred maintenance during the downturn) is problematic.

For more information, visit the Marcus and Millichap website.

Written by johnkilpatrick

April 17, 2010 at 5:33 pm

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