2014 ALIS impressions: Let’s all sing along
2014 ALIS impressions: Let’s all sing along
03 FEBRUARY 2014 7:14 AM

The mood was buoyant at L.A. Live, despite our projections RevPAR growth will decelerate during the next two years. 

The Americas Lodging Investment Summit took place in its usual place at its usual time, and the collective mood was buoyant. No major deals were announced, but given the noise level on the ground floor of the JW Marriott in Los Angeles it seemed a lot of conversations about buying, selling and building were taking place. 
Revenue per available room increased 5.4% last year, and most industry participants answered my question, “How was 2013?” with “very good!” or “great!!” or “awesome!!!” And indeed, U.S. hoteliers sold more rooms than ever before and generated more room revenue than ever. 
How long can the good times last? As usual we tried to answer that question on stage with our friends from PKF. Unfortunately few people heard it live since conference host Jim Burba, in his infinite wisdom, had us present our forecast at 7:30 a.m. And given the allure of L.A. Live’s nightlife, audience members were few and far between.  
It was a bit of an unexpected presentation because for the first time in recent memory the PKF and the STR forecasts for the next two years are directionally different. Mark Woodworth and his team expect a “terrific year” (his words) of RevPAR growth to be followed by an equally great year (2014: +6.6%, 2015 +7.5%). The team around Randy Smith, however, thinks 2014 and 2015 will see a step down in growth (2014: +5.3%, 2015: +4.7%). 
The difference in opinion stems mostly from different readings of the unfolding economy and related demand growth. We also differ a bit on the amount of pricing power the industry can achieve. 
Quite a few of industry participants, myself included, hope strongly the PKF numbers turn out to be correct. But given the industry average-daily-rate growth during the last 30 months—which has been arguably the best supply-demand situation in our lifetime—was less than stellar, I am afraid our forecast will be closer to the actual results. 
No wonder Mark called me a “party pooper” after my part of the presentation. 
That said, economist Kevin Warsh also seemed more tempered in his enthusiasm when he said, “Risks are highest when measures of risks are lowest.”
Sounds like trouble
Attendance was strong, the second highest on record. And there were familiar faces on stages, in robes, singing (including our very own Elizabeth Winkle, managing director STR Global). 
Of course, when things are so good that folks are singing it gives some observers pause. Are we being rationally exuberant? Or is the irrational part creeping in again?
IREFAC downplays supply
I was a bit surprised that the closing IREFAC panelists dismissed the coming room-supply increase as a minor issue that will not severely impact growth. While I agree the total U.S. supply change is still below the long-term average of 1.7%, I am less enthusiastic when I look at the number of rooms under construction in several markets and chain scales. (Please have a look my ALIS slides for more detail). 
And because ours is a street-corner business, this new supply will impact occupancy, and probably ADR, in quite a few markets. 
Closing thoughts
Overall, ALIS 2014 was another excellent event with a great opening day lineup, including Earvin “Magic” Johnson and lots of food for thought. 
When we meet again at the NYU International Hospitality Industry Investment Conference, we will have a bit more visibility into group demand (or lack thereof), transient ADR growth (or strength thereof) and what new supply is on the horizon. 
Let’s see who is singing then. 
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