The Hotel Times - March 2008 - (Page 31)

REAL-ESTATE UPDATE RevPAR growth will hover around 4 percent to 5 percent during the next year. For now, hotel sector still looks promising BY E L L I OT M A R KO W I T Z, C O N T R I B U TO R T he leading economic indicators—from jobless claims to factory orders to housing starts—are trending in the wrong direction, causing concern about the overall health of the U.S. economy. Add to this the rising price of gas and oil, a jittery stock market and declining consumer conﬁdence, and lending companies and investors are starting to tighten their purse strings. As a result, the commercial, retail and private housing real-estate markets are pulling back. All eyes are turning toward the lodging industry to see whether the hotel market will soon follow suit. The gut feeling from industry observers is that as consumers and corporations start feeling the financial pinch, they will cut back on travel, which will take a toll on occupancy rates and eventually bring down revenue per available room and average daily rates. However, the current state of the hotel lending environment remains stronger than its counterparts; and although more and more hotels are coming online every month, it likely will take some time before The supply catches up with demand, even during a slight economic downturn. volume of “I am fairly optimistic that [the hotel sector] is going to move through this peri- transactions od with just a few dings but no serious col- may slow lateral damage,” said Jack Corgel, Robert C. Baker Professor of Real Estate at Cornell down a bit School of Hotel Administration and senior because of advisor to PKF Hospitality Research. “In theory, the hotel real-estate sector should the credit crunch. JACK CORGEL, ROBERT C. BAKER PROFESSOR get hit harder than other sectors, such as OF REAL ESTATE AT CORNELL SCHOOL OF HOTEL commercial and real-estate, because of the ADMINISTRATION, SENIOR ADVISOR TO absence of leases. But things are still lookPKF HOSPITALITY RESEARCH ing fairly strong, and revenue per available room will grow in 2008. RevPAR growth will hover around 4 percent to 5 percent within the next year, which is still above the rate of inflation.” Corgel believes the hotel industry is stronger than other real-estate classes. “Hotels and the development pipeline still look pretty good,” he said. “The volume of transactions may slow down a bit because of the credit crunch, so the brokers won’t be too happy, but the commitment for development products will be fulfilled.” Robert N. Goldstein, president and chief executive of Hospitality Consultants, agreed: “ ” Continued on page 32 www.TheHotelTimes.com March 2008 The Hotel Times 31

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The Hotel Times - March 2008 Business Outlook Editorial Outlook Contents Conference Preview Capital Outlook What's Driving Growth? European Outlook Development Outlook Fractional Outlook Branding Source List Insurance Outlook Brokers Update Brokerage Outlook Lodging's Balancing Act Transactional Facts Lending Outlook Lenders Source List In Closing

The Hotel Times - March 2008

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