Hotel executives are mad for select service these days, but they’d be crazy to forget about full-service hotels.
During the past couple years I have watched, helpless, as the hotel industry has descended into a state of select-service madness.
It started slowly. A Courtyard by Marriott sold here; a Hampton Inn & Suites acquired there. But as time progressed, executives in the industry apparently became hell-bent on providing everyone with a free continental breakfast. It’s gotten to the point where I’m thinking it might be easier on my fingers if I just add keyboard shortcuts for the words “Courtyard” and “Garden.”
It doesn’t appear my fingers will be getting a rest anytime soon, either. Hotel investors such as Supertel Hospitality and Waramaug Hospitality LLC are just two of the companies that are re-jiggering portfolios to get a piece of the select-service market.
I understand the appeal. Select-service hotels have shown reasonably strong performance. Year-to-date through July, U.S. select-service revenue per available room is up 5.6%, while average daily rate is up 4%, according to data from STR, parent company of Hotel News Now. The hotels also are less expensive to develop and have a lower expense level than their full-service brethren, which helps the bottom line.
All that said, I wouldn’t turn my back on full service just yet. As Austin Khan, chief investment officer at Laurus Corporation, told me recently, full-service hotels have “more levers to pull” than select service when it comes to building the hotel’s revenue base.
His company is going against the grain by looking to bulk up its stock of full-service hotels. The price point at which hotels can be acquired is also compelling, Khan added.
Need more proof as to why you shouldn’t turn your back on these full-service behemoths? Remember what I said a little earlier about performance? Well, full-service RevPAR is up 5.8% year-to-date through July in the U.S., while ADR is up 4.2%, 20 basis points higher than the mark for limited service.
Bottom line: Don’t turn your back on full-service hotels. They’re not going away anytime soon.
Tweet of the Week
Speaking of hotel transactions, there are still good deals to be had as illustrated by the tweet below.
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