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CENTURY 21 Access America |
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Industry NewsFeature Continued …Radd Way, a regional president for construction firm Weitz Co., of Des Moines, Iowa, says his office is building a Holiday Inn in Kansas City, Mo., and is in discussions on several other projects. “We’re dealing with private investor groups getting into the hotel market that haven’t done [hotel development] before,” he says. Much of the building will be in the suburbs, which have lower barriers to entry than urban centers, says Bruce Ford, a senior vice president with Lodging Econometrics. In suburban Washington, D.C., for example, 68 hotels are in the development pipeline. To be sure, some question whether the industry is overly optimistic since part of the supply shortage has been caused by developers that have been converting hotel buildings into condos at a record pace. Last year, room numbers in nearly half of the top 25 hotel markets actually shrank. |
Meanwhile, hotel profits are soaring, reaching a record this year and on pace to set another in 2007. The Dow Jones U.S. Hotels Index is up 150% during the past three years. Bulls like Joseph R. Greff, an analyst with Bear Stearns, sees more room to run with demand still up strongly and supply still constrained since the first of the 2006 room starts won’t come online until the end of next year. In a recent research report, Mr. Greff said the hotel stocks he covers, including Hilton Hotels Corp., Host Marriott Corp. and Starwood Hotel & Resorts |
Worldwide Inc., still have 15% to 20% of potential upside on average. The favorable outlook also is attracting investors. Sales of existing hotel properties increased by 63% to $21 billion in 2005, up from a then-record $12.9 billion in 2004, according to Jones Lang LaSalle Inc., a Chicago-based commercial real-estate services firm that tallied hotel purchases of more than $10 million. And U.S. investment bubbled over to Europe, helping lift hotel sales there to a record €16.2 billion ($19.7 billion) in 2005, up 73% from €9.36 billion in 2004. |
Volume 2; Issue 12
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