San Francisco – Lodging Brokers Network attended a conference held by Hospitality Valuation Services (HVS) on U.S. Hotel Market Connections Conference at the Sir Francis Drake Hotel in San Francisco Wednesday, May 1st. The panelists discussed market conditions across the major markets in the United States and our local area. The good news is the lodging business projections for the next few years are very favorable.
According to reports from Smith Travel Research (STR) and HVS, in 2012 and the 1st quarter of 2013, values in San Francisco, Napa and other parts of California are back at 2006 levels. From 2009 to 2012, San Francisco occupancy increased from 73.7% to 81.3% (10.3% increase), and ADR increased from $146 to $191 (30.8% increase). Therefore, RevPAR (revenue per available room) or room revenue in San Francisco increased from $108 to $155 (43.5% increase). HVS expects RevPAR will continue to trend upward through 2016.
The Panel discussed transaction volume trends and if it is a good time to sell or hold an asset. Transaction volume gradually increased from 2009 through 2011. Transaction volume increased substantially in 2012, with the number of transactions doubling since 2007. The general consensus was that markets have recovered and are trending up, and assets are generally back to trading at 7 to 8 caps in high barrier to entry locations. Selling now will give buyers the opportunity to build on the upward trend before the cycle stabilizes and starts to trend down again. In markets that are still just starting to recover, it may pay to hold the asset for a year or two.
Health care is a big concern as we approach 2014. Industry experts expect operating costs to increase by approximately 2 to 3%. The larger hotel companies that expect to incur this additional cost will be raising their rates to retain their bottom line earnings.
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