Prices keep rising for Hospitality Properties, forcing investors into smaller markets as Buyers chase yield. Things continue to be very good in the Hospitality Sector. The amount of money Hospitality investors are spending has stabilized at a high level. Investors continue to accept relatively low yields on their acquisitions even though interest rates have risen and are expected to rise more. Eventually this should have an effect on pricing.
It is anticipated that the supply of new hotel rooms will peak in 2018 at approximately 100,000 new rooms. This would be the largest number of new rooms since 2009. Overall the increase in new rooms will be approximately 2.0 percent which has been the long term average. The addition of the new supply will cause occupancy to slightly decline in 2018 but the good news is the anticipated increase in ADR should offset the decline in occupancy rate resulting in an overall increase in Rev Par.
Looking forward the Hospitality Sector continues to have a very bright future. The year 2017 was the eighth consecutive year of increasing profits. Annual Rev Par gains are projected to increase over the next couple of years albeit at a slower rate than the last few years. Keeping expenses under control will be paramount as we enter a period of positive but slower Rev Par growth.