Apr
24

Mixed Profit Forecast For Hotel Properties

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The profit outlook for full-service, resort and convention hotels is bright. However, the forecast for limited-service hotels is decidedly less sunny. The hotel industry overall is expected to see 6.5% compound annual growth in room revenue through 2016, resulting in a CAGR of 6.1% percent in total hotel revenue during the same period.

So found PKF Hospitality Research LLC, which examined the financial performance of hotels for the period 1978 through 2011, and used the data to measure the relationship between annual changes in total hotel revenue and movements in NOI for full-service, limited-service, resort and convention hotels.

For each lodging subsector, PKF-HR’s Robert Mandelbaum, director of research information services, and research analyst Gary McDade calculated a “flow-multiple” that measures how much an increase or decrease in revenue was retained as profits. “Simply put,” says Mandelbaum, “the flow-multiple is the ratio of year-to-year changes in profit to changes in revenue and, therefore, provides evidence of how well properties manage expenses and maximize profits.”

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