For Immediate Release
Chicago, IL – August 15, 2012 – Today, Zacks Equity Research discusses the U.S. Hotels & Lodging, including Morgans Hotel Group Co. , Red Lion Hotels Corporation (RLH - Snapshot Report) , Great Wolf Resorts Inc. , Starwood and Marriott (MAR - Analyst Report) .
A synopsis of today’s Industry Outlook is presented below. The full article can be read at
In the U.S., Smith Travel Research noticed growth of 3.5% in demand and an upside of 0.4% in supply during the second quarter of 2012. The firm expects the same trend to continue in the second half of 2012, but at a slower pace. In the U.S., PwC expects supply in 2012 to inch up 0.5% but demand to increase 1.8%.
Room rates are on the rise in an environment marked with higher demand and lower supply, thus resulting in RevPAR growth in 2012.
According to data published by Smith Travel Research in June, the total active U.S. hotel development pipeline comprises 2,741 projects totaling 296,333 rooms, down 6.7% year over year. Among the chain scale segments, Luxury reported the largest increase in rooms in the total active pipeline, with 6,358 rooms (up 54.4%). Among the rooms under construction, the upscale segment reported the maximum increase of 52.9% with 18,692 rooms.
Shift Toward Asset-Light Model
Since late 2010, transition to an "asset light" business model has gained prominence in the hotels and REIT industries. Asset sales remains a long-term strategy to strengthen financial flexibility, which help companies grow through management and licensing arrangements instead of direct ownership of real estate. A higher concentration of management and franchise fees reduces earnings volatility and provides a more stable growth profile.
Hence, the hoteliers are focused on rebalancing their portfolios by increasing contributions from managed and franchised hotels. This fee-based business is attractive as growth is powered by multiple sources like RevPAR growth, unit additions and incentive fee escalation. The business is also capital efficient as owner/developer partners provide the capital and the company earns a fee by managing/franchising the property.
Following the industry trend, many industry players like Morgans Hotel Group Co. , Red Lion Hotels Corporation (RLH - Snapshot Report) , Great Wolf Resorts Inc. and Starwood embarked on an asset disposition strategy.
Focus on Acquisitions
According to Jones Lang LaSalle, hotel operators are becoming proactive on the acquisition front, a trend which emerged last year and gaining momentum in 2012. Hotel operators are presently focusing on purchasing assets, mainly to aid brand development, in a small number of key cities. Consistent with this trend, industry behemoth Marriott (MAR - Analyst Report) has inked a definitive acquisition agreement with Gaylord Entertainment Co for an upfront payment of $210 million in cash by October 2012.
Increased Capital Expenditure on Renovation
Most of the hoteliers are increasingly investing on property renovations in recent times. Hotel companies are working hard on guest satisfaction to enhance their position in a cut-throat environment. Brand conversion and remodeling has emerged as a trend for major hoteliers. Many industry biggies like Starwood, Marriott and others have tread the same path.
There are several well positioned, older hotels in metro markets, which are good candidates for restructuring. Hence, we believe that 2012 will likely witness further renovations.
Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today by visiting https://at.zacks.com/?id=2679.
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD from MIT Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment
Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at https://at.zacks.com/?id=4581.
Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Follow us on Twitter: http://twitter.com/zacksresearch
Join us on Facebook: http://www.facebook.com/ZacksInvestmentResearch
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
Zacks Investment Research
800-767-3771 ext. 9339