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Hotels Will Stay Hot In 2014


Reports of the hotel market's health are not greatly exaggerated, Property Valuation Advisors' Brian Flanagan (snapped with the kids in West Yellowstone, Montana) tells us. Average daily rates should continue to climb in 2014 while occupancy will stay about the same, he predicts. (A lot of people want to use towels that aren't their own.) The biggest stories will be the shiny new product dotting the skyline, which could have a detrimental effect on existing hotel supply. But the past couple of years have treated hotels well, so they should have the money to catch up on any type of property improvement plans required by the franchise or that ownership wants to make, Brian says.


All segments of the market are trending up, but the future's looking especially bright for luxury players. "They've hit a point in time where they feel they can really start cranking rates," he tells us. (Here's the newly opened and ultra luxury Langham Chicago, snapped during construction.) In terms of financing, Brian's seeing more securitization of hotel loans from the Wall Street firms. It's helpful for larger deals, but it's still tough to find any type of development loan (which tempers supply to some extent).


But the strongest players in development have a lot of institutional joint partners to fund new projects. He doesn't expect a great deal of hotels to trade in 2014 (they never do, it's one of the smaller institutional asset classes in the neighborhood), but has noticed capital searching for top tier property. (We're itching to know who will pick up the Palmer House from Thor Equities. Its famed Empire Room, above.) Over the holidays, Brian's psyched for the kids to come home for some family time.