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REITs bigger spenders during rebound: CapEx study

The International Society of Hospitality Consultants (ISHC) and the Hotel Asset Managers Association (HAMA) have introduce the ISHC CapEx 2014: A Study of Capital Expenditures in the Hotel Industry. Here are the key findings based on STR data from 502 hotels in the United States:

  • Capital spending for all properties was impacted by the current economic cycle with 2010 representing the lowest spend in the reporting cycle of this study.
  • Capital spending in 2012 at 9.4% has rebounded to levels experienced in 2007, but still below the peak in 2008 at 11.4%.
  • Repair and maintenance (R&M) spending fell within a range of 4.2% and 5.1% with highest levels of spend in 2009 and 2010 as the economy had a more severe impact in the hotel industry.
  • Spending in 2009 was at 5.1% and 2011 at 5% and by 2012, spend returned to more normalized levels at 4.5%.
  • Over this cycle, REITS significantly outspent all other ownership types at 9.5% versus 4%. This is attributed to the repositioning and branding initiatives, in addition to the REITs taking advantage of downturn to deploy available reserves to prepare properties for the anticipated recovery.
  • Properties built prior to 1990 had the highest capital spend at 9.6% with properties built between 1990 and 2000 spending 7% and post-2000 at 2.9%.
  • 2012 combined spend of capital and R&M at 13.9% was the second highest year of the six-year study behind 2008 at 16%.

The study represents 42 hotel brands and independent hotels (44% full-service; 39% select-service; and 17% extended-stay). Fully, 36% were under 10 years old, 22% between 11 and 20 years old, 23% between 21 and 30 years, and 19% over 31 years of age. Over the period of the study, hotels in the study generated US$36.5 billion in revenues, spent US$3 billion in capital and US$1.7 billion in R&M.

The full study will be available Spring 2015. For more information and reserve a copy, email CapEx@ISHC.com.

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