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US Hotel Industry 2012: Upbeat with $5Billion in Transaction Volumes!

Debiprasad Sarangi
Debiprasad Sarangi

Dismantling any fears about the much-argued, second bout of a global economic slowdown, Jones Lang LaSalle Hotels (United States)reported that the volume of hotel transactionsfor the US crossed the $5billion mark in May 2012!

This figure gains a bigger significance considering that this is the maximum, hotel transactional volume achieved in the last, four years, i.e. excluding re-capitalizations, foreclosures and note sales from the calculation.

The current, US hospitality realty market is looking upbeatwith more investors seeking to lap-up hotel realty propositions. With more hotels, both big and small, being bought, the single-asset transactional average has gained an overwhelming average of $40 million for 2012.

This is for the period of January to May 2012—this 5-month average is higher than the 5-year, single-transaction average recorded from 2006 to 2011.

Investors are still optimistic about the fundamentals that drive hotel operations in the US. It should be mentioned that hotel management systems being increasingly adopted by premium, mid-size and small hotels has contributed to better management and revenue maximization.

This trend gains even more credibility considering that the US realty sector is still being hammered, in the overall perspective. Averse to this gloomy trend, hotel realty trends remain strong and the RevPAR (hotel revenue per available room) too continues to grow impressively.

Private equity investors are emerging as the most aggressive of hotel buyers. They are followed by Real Estate Investment Trusts that have dominated the purchase of urban hospitality assets. Based upon these statistics, US hotel industry transactions seem set to reach $15 billion by the end of 2012.

The highly-optimistic US Hotel Industry is a continuation of the encouraging trends that were witnessed in 2011 where hotel transactions worth $19 billion were recorded. Here, the average, per-room revenue, presented a multiplier of nearly 4.2.Revenue Per Available Room (RevPAR) is expected to remain strong in 2012 too as the national travel sector continues to recover.This niche has witnessed the return of leisure and business travelers who have ensured that even the lodging sector is upbeat with rising number of bookings.

It seems that the US Hotel Industry will prevail over the sluggish, national reform policies and the European crisis that are beginning to cast their shadow across international economies.

Looking at the reassuring current scenario and the optimistic future, hotels in the US are steadily raising their room rates and adopting better hotel management software(s), ready to engage and manage higher occupancy levels.