I wanted to post a quick update on hospitality recovery. The 2012 occupancy rate seems to have settled between 2011s improvement and the pre-recession (2000 to 2007) median occupancy rate – a 5.5% y-o-y improvement. All things considered, that is still good news. But what’s better is that RevPAR (revenue per available room) is up 8.7% y-o-y. Average daily rate (ADR) is up 3.1% – keeping up with inflation.
On a more local economy note – the biggest drop off in occupancy, ADR and RevPar was in Dallas. And proudly Houston, had one of the biggest jumps in occupancy at 12% y-o-y – brining average occupancy to 61%. Oil and gas, the shale fields, and health care are driving Houston. The fact that we’re also become known as a good sporting event city will help with hospitality too – as the NBA All-Star game will be hosted in Houston in 2012.
All in all, I think this is good news for investors who like to hedge real estate investments in hotels. Generally hotels are attractive because you acquire the underlying business – and the above notes illustrate to me that in Houston the underlying business looks to be on the rebound – meaning a window for seeking value is open now, but maybe not for long.Graph below is from Calculated Risk