Hotel Sale Prices Increase as Economy Rebounds

As a new cycle of increased tourist activity begins, investors are driving up the selling price of hotels in anticipation of higher future profits. According to the latest quarterly study by Lodging Econometrics, the average selling price of a hotel room during the first quarter of 2011 was $125,946, which represents an increase of nearly $30,000 from the same quarter last year.

These numbers show some interesting trends that shed light on the future of the hotel industry. Hotel sales were concentrated in the top markets of the United States. In fact, 47 percent of all transactions occurred in the top 25 metropolitan markets, the highest percentage ever.

Much of the growth in average sales prices was concentrated in upscale and luxury hotels, where margins tended to be higher, and customers tend to be more resistant to economic downturns. Of the 110 sales that took place during the first quarter, 37 percent involved higher-end hotels.

In addition, larger hotels were also a significant driver of growth as investors have targeted their holdings. Nineteen percent of all hotels sold in the first quarter had more than 200 rooms. Those hotels sold for an average room price of $181,600, a significantly larger number than for general hotel rooms overall.

This growth in hotel room prices, encouraged by the low cost of debt and improved economic prospects, bodes well for the future of any hospitality management company that is looking to provide their management services to the hotel industry, since the value of these services will only increase as investors pay more for hotels.

However, given the current lack of new hotel construction, much of this new growth will be directed towards the top hotel management companies. These new buyers will be looking for a hospitality management company that is experienced in running successful hotels. Because of this, the nationally renown company Hotel Managers Group will certainly be expanding during the foreseeable future.