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U.S. Lodging Industry Capital Expenditures Continue To Accelerate In 2012

publication date: Oct 31, 2012
 | 
author/source: Dr. Bjorn Hanson,
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Following three years of limited capital expenditures beginning in 2009, U.S. lodging industry capital expenditures for existing hotels are accelerating. The forecast for the coming year is for capital expenditures of approximately $5.0 billion, a 33 percent increase over 2011's $3.75 billion, which reflected an increase of 39 percent over 2010 levels, following decreases of 40 percent in 2009 and an additional 18 percent decline in 2010. The 2012 levels represent a significant increase but still 10 percent below the $5.5 billion in capital expenditures for U.S. hotels in 2008.         

Bjorn Hanson

                  U.S. Lodging Industry Capital Expenditures Continue To Accelerate In 2012 |

By Dr. Bjorn Hanson

Tuesday, 09 October 2012

Capital expenditures include improved guest amenities and services such as:

 

  • In room iPads
  • Guest room design including work spaces, radio alarm clocks and sound systems (many are MP3 compatible), seating, bathrooms, and lighting
  • Beds and bedding
  • High speed internet access
  • Flat screen televisions
  • In-room amenities including irons/ironing boards and coffee makers
  • Guest services and conveniences including enhanced complimentary breakfasts, check-in/check-out kiosks, and expanded business centers
  • Redesigned lobbies
  • Reconcepted restaurants especially to appeal to Gen-Xers and Millenials
  • Added or enhanced fitness facilities
  • Added or enhanced technology for meeting rooms and ballrooms

 With the significant declines in occupancy, average daily rate (and therefore RevPAR) and profits, expenditures in 2008 and 2009, many capital expenditures were deferred through 2010. Unique to this cycle has been that many brands and management companies waived many new and existing requirements for capital expenditures to help owners through this period of decreased financial performance, but they are now requiring these improvements to maintain quality and brand. The forecast increase in capital expenditure spending for 2012 reflects several factors including that occupancy will recover to the highest level since 2007, and average daily rate will increase the most since 2007.

 Below is a summary of estimated U.S. lodging industry capital expenditures in recent years:

 Year | Amount (in billions)

  • 2005 | $4.8
  • 2006 | 5.0
  • 2007 | 5.3
  • 2008 | 5.5
  • 2009 | 3.3
  • 2010 | 2.7
  • 2011 | 3.75
  • 2012 | 5.0 (forecast)

 These estimates are based on interviews with selected hotel executives (including brand and management company representatives) and design and construction executives, an analysis of brand standards, and other sources including press releases and media reports.

 By Dr. Bjorn Hanson, Divisional Dean | Preston Robert Tisch Center for Hospitality, Tourism, and Sports Management | NYU School of Continuing and Professional Studies (NYU-SCPS)

 New York University (NYU)

School of Continuing and Professional Studies (SCPS) The Preston Robert Tisch Center for Hospitality, Tourism, and Sports Management
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