The Chesapeake Point of View

Hotel Forecast: Mostly Sunny Skies For Revpar In Southeast

Hotel Forecast: Mostly Sunny Skies For Revpar In Southeast

May 05, 2013

In some respects, the Southeast region is experiencing similar patterns of growth to the rest of the nation. As the headaches and financial pressures of the recession continue to fade, modest growth continues across most parts of the Southeast.
So what is the hotel outlook in this region? The good news is that, fundamentally, the hotel industry headlines in the Southeast are positive. Demand in the region continues to grow, and it appears the Southeast is coming back strong; perhaps even picking up some additional momentum relative to the immediate post-recessionary period. Other encouraging signs are that certain hotel properties — most recently in central Florida and South Carolina — are actually selling for more than their asking price.
The general consensus among industry analysts is that 2013 will deliver somewhere between 5 to 6 percent RevPAR growth. That figure is similar to 2012, and remains a significant improvement over 2011.
At the same time, it’s possible that the summer of 2013 may not be as much of a blockbuster as the summer of 2012, particularly if the anticipated cuts in government spending from the sequester continue. Travel is generally one of the first sectors to feel the financial restrictions caused by government cuts, and the sequester could throw water on the embers of the recovery and slow business down.
Washington, D.C. and the surrounding Virginia and Maryland markets are likely to be among the most vulnerable to sequester-related budget cuts. The most recent presidential inauguration wasn’t as strong as the inauguration in 2009, in terms of hotel revenues and regional impact. While that is just one data point, it is enough (in combination with the ongoing sequester concerns) to make owners and operators in the region slightly uneasy.
Despite the outsized influence of government spending, the D.C. market has yet to see any real impacts downstream. But this is an issue hospitality industry analysts and observers, as well as hotel owners and operators, will be keeping a close eye on in the months ahead.
In the Carolinas, the overall outlook is more reflective of the general optimism across the Southeast. Quality hotels in the region are continuing to meet or exceed expectations. And while there is always the potential for submarket or property-specific year-toyear fluctuations based on group mix and large group bookings, a general 5 to 6 percent RevPAR increase is not an unreasonable expectation in 2013.
Georgia also remains fairly strong. Smith Travel Research forecasts that Atlanta will perform above U.S. industry RevPAR projections for both 2013 and 2014. While other cities like Savannah, Ga., are performing well, the activity in Atlanta will have a disproportionate and significant overall impact on the state’s economy.
Millions of viewers had a firsthand look at one of the reasons hotel professionals in the Louisiana market are feeling good about 2013 so far: the Super Bowl. Along with generating new revenue, Super Bowl IV affirmed that the Superdome and New Orleans area hotels were back in action. Louisiana has continued to show year-over-year improvements following Hurricane Katrina, largely due to continued growth in New Orleans.
While projections are generally optimistic, hotel owners and operators are still understandably cautious. The last four or five years have been ingrained in many of the perils of a volatile market, and the theme for 2013 will likely be one of cautious optimism rather than aggressive expansion. That said, the majority of hotels across the Southeast are reporting a strong first quarter, and hotel owners and operators will be trying to build on that early success and continue to capitalize on market momentum.