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“Slow and Steady” are the key words

“Slow and steady” these are the words I hear at the investment conferences and franchise shows I have attended recently. Things are certainly much better than the place we were in just four years ago. The lodging recovery is well under way and predictions are, barring any major catastrophes, we have another three to five years of continued steady growth. (See chart below)

2013 Predictions

Occupancy %:    PwC:  62.2    STR:  61.4
Occupancy Increase:    PwC:  .8%    STR:  3%
ADR:    PwC:  105.45    STR:  111.01
ADR Growth:    PwC:  4.4%    STR:  4.6%
Rev Par:    PwC:  5     STR:  68.17
Rev Par Growth:    PwC:  5.9%    STR:  4.9%
Demand:    PwC:  1.8%    STR:  2.0%
Supply Growth:    PwC:  .8%    STR:  1.4%

For Sellers it is a “Perfect Storm”. Historically low interest rates, lack of product to buy, and Buyers with lots of cash. Financing has loosened some, allowing good economic deals to be financed even new construction with experienced hoteliers. The consistent requirement from all lenders is that they want the Borrower to have hotel management experience. A hard lesson learned by the Lenders as a result of the Great Recession.

The housing market has stabilized giving consumers confidence once again. Interest rates have ticked up to 30 to 50 basis points over the last 30 days as a result of the economy gaining strength and the impending start of the winding down of stimulus from the Federal Reserve. Even with the slight uptick in interest rates that still remain historically low.