We’re at the height of the summer travel season. No doubt many families are on the road today, and will be looking for a hotel at which to spend the night or a week. The summer vacation is a rite of passage. And families, even when times are tight, often stretch their budgets to take these trips.
Maybe that explains the strength of the hospitality industry. This commercial sector has held tough, even as the economy’s recovery remains frustratingly slow.
Marcus & Millichap Real Estate Services recently released its latest hospitality research report, one covering the second quarter of 2012. According to the report, the hospitality sector is seeing steady improvements in room demand and revenue. Part of the reason? Gas prices have fallen, inspiring more consumers to hit the road.
At the same time, construction crews still aren’t building many new hotels. This has helped lead to a growing demand for those hotel rooms that are available. Marcus & Millichap reported that 17 states during the first four months of 2012 reported a drop in available hotel rooms.
Overall, Marcus is predicting that for 2012 the national occupancy rate for hotels will jump 100 basis points to 61 percent. If 2012 does end with this rate, it will mark a five-year high in year-end occupancy rates.
The national average daily rate that travelers pay is expected to rise in 2012, too, up 4.3 percent from the year before at $106.02.
Two Midwest states — Indiana and Illinois — are doing especially well when it comes to the performance of their hospitality sectors. According to Marcus & Millichap, Indiana ranked as the second most impressive hospitality market this year through April. Much of this came from hosting the Super Bowl in February.
Illinois ranked third on the list, beaten out only by Indiana and top finisher North Dakota.
And though the Marcus report does rightly point out that new construction in this sector has been limited, we have seen some recent hotel construction in the Midwest or at least plans for rooms. In Chicago, for instance, a new Aloft Hotel is expected to open sometime in 2013.
And in Minnesota, the Mall of America will soon be getting another hotel.
Minneapolis-based Ryan Companies beginning in April of next year will develop and build what Mall of America officials are calling Phase 1C of the famous mall. The development will include a high-end luxury hotel, medical office building and retail space. It will cost from $200 million to $250 million to build. The hotel should bring about 350 new rooms to the Twin Cities area.
Rick Collins, vice president of development for Ryan Companies, told me that no brand is yet attached to the hotel. But he’s not worried about landing a big name.
“This is a desirable project,” he said. “Everyone knows Mall of America. This is a great place for a hotel brand to be.”
– Dan Rafter