Hotel developers, you’d be wise to heed the words of Matt Walker.
Walker, executive VP at Lowe Destination Development, was one of the speakers earlier this month during the 2014 Hospitality Law Conference in Houston. During one of the conference sessions, Walker said he’s surprised by how quickly hotel development is gaining speed.
During his talk, Walker offered a piece of advice developers would do well to take to heart.
“We are making a concerted effort to get into the ground now because we don’t know how long this investment cycle is. We probably won’t be looking for new projects in two years,” he said.
Even though it seems as if this recovery has just gotten underway, it won’t be long before we begin the inevitable slide into a new cycle. A lot of the owners and developers I spoke with during the Americas Lodging Investment Summit last month in Los Angeles said that this recovery does still have some runway left to it, maybe two years’ worth.
That means if you start building immediately then maybe, just maybe, your sparkling new hotel will have some time to reap the rewards of the peak of the cycle.
But then again, it might already be too late.
As we previously reported, our parent company, STR, is expecting revenue-per-available-room growth to slow next year. RevPAR growth is expected to be 4.7% during 2015, down from 5.3% growth this year. Combine that with supply increases in some markets; the slow, but gradually widening availability of construction loans; ADR that might not grow but instead remain steady; oh, and of course the omnipresent Black Swan threat; and you can begin to see how it might be possible that, incredibly, the end of the recovery could be in sight.
Of course, maybe you don’t believe (or don’t want to believe) Walker. That’s fine. But just keep this in mind: A few weeks ago I warned all of you to keep an eye on data security, and shortly thereafter White Lodging Services announced it was investigating a possible data security breach.
My prognostication powers are obviously at an all-time high here, just saying. Besides, did you really think I was going to make a stone cold call like that and then expect me to never mention it ever again?
Tweet of the week
I promised myself I wouldn’t pick on Sochi hotels anymore, but they keep bringing it on themselves; you can’t blame me.
Returned to a #Sochi hotel room where the bedroom curtains have vanished and this was on the table. Hmm. pic.twitter.com/oiHohtYUbE — Matt Galloway (@mattgallowaycbc) February 18, 2014
Email Shawn A. Turner or find him on Twitter or Facebook.
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