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

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Trend Analysis Report

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)

September 24, 2012

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.

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.

EDITORS: To interview Dr. Bjorn Hanson about this research or for more information, please contact Cheryl Feliciano at cheryl.feliciano@nyu.edu or 212-992-9103 or Suzanne Dawson at sdawson@lakpr.com or 212-329-1420.

About the Author

Bjorn Hanson, Ph.D., is divisional dean of the NYU-SCPS Preston Robert Tisch Center for Hospitality, Tourism, and Sports Management. He is a hospitality and travel researcher, widely respected for his industry forecasts and for having created econometric models that transformed business analysis in the field. Prior to joining NYU-SCPS, he held the position of global industry leader, hospitality and leisure, at PricewaterhouseCoopers LLP.

About the NYU School of Professional Studies

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