By Bjorn Hanson, Ph.D., Divisional Dean
Preston Robert Tisch Center for Hospitality, Tourism, and Sports Management
NYU School of Continuing and Professional Studies (NYU-SCPS)
Capital expenditures (“cap ex”) for U.S. hotels are forecast to exceed the prior record level spent in 2008. The forecast for 2013 capital expenditures is approximately $5.6 billion.
The increase in 2013 is 107.4 percent over 2010’s $2.7 billion. There were decreases of 40 percent in 2009 and an additional 18 percent decline in 2010 in response to decreasing occupancy, ADR, RevPAR, and profits in 2009.
The expenditures in 2013 reflect deferred items and meeting new brand standards, and although industry performance has improved (occupancy will return to close to 2007 levels, and ADR will finally exceed to the prior peak of approximately $107.50 in 2008), these amounts are a challenge for many owners: profits per room in 2012 were 6.6 percent below 2007 levels, based on STR industry profit and supply data.
Although total 2013 U.S. industry capital expenditures will be at a record level, the nominal amount per available room will be slightly less (approximately 3 percent) than in 2008.
Capital expenditures include improved guest amenities and services such as:
- High speed internet access and increased capacity
- Guest services and conveniences including enhanced complimentary breakfasts, check-in/check-out kiosks, and redesigned business centers
- In room iPads
- Redesigned lobbies
- Guest room design including work spaces, radio alarm clocks and sound systems (many are MP3 compatible), seating, bathrooms, and lighting
- Beds and bedding
- Flat screen televisions
- Added or enhanced technology for meeting rooms and ballrooms
- In-room amenities including irons/ironing boards and coffee makers
- Reconcepted restaurants
- Added or enhanced fitness facilities
Unique to this recent cycle has been that many brands and management companies waived many new and existing requirements involving capital expenditures to help owners through this period of decreased financial performance. This flexibility has changed, and brands and management companies are now requiring these improvements to maintain quality and brand.
In addition to brand and management company influence, social media postings are resulting in additional capital expenditures as owners respond to criticisms and unfavorable comments.
The forecast increase in capital expenditure spending for 2013 reflects several factors including that occupancy will be at its highest level since 2007 and average daily rate will increase to a nominal record level. Industry profits are also expected to increase by 10 to 15 percent in 2013 to a new record level.
Below is a summary of estimated U.S. lodging industry capital expenditures by year:
Year Amount (in billions)
2013 $5.6 (forecast)
These estimates are based on interviews with selected hotel executives (including brand and management company representatives) and design and construction executives, an analysis of brand standards, and other sources including press releases and media reports.
About the Author
Bjorn Hanson, Ph.D., is divisional dean of the NYU-SCPS Preston Robert Tisch Center for Hospitality, Tourism, and Sports Management. He is a hospitality and travel researcher, widely respected for his industry forecasts and for having created econometric models that transformed business analysis in the field. Prior to joining NYU-SCPS, he held the position of global industry leader, hospitality and leisure, at PricewaterhouseCoopers LLP.
About the NYU School of Continuing and Professional Studies
Established in 1934, NYU-SCPS (scps.nyu.edu) is one of NYU’s several degree-granting schools and colleges, each with a unique academic profile. The reputation of NYU-SCPS arises from its place as the NYU home for study and applied research related to key knowledge-based industries where the New York region leads globally. This is manifest in the School’s diverse graduate, undergraduate, and noncredit programs in fields such as Real Estate, Real Estate Development, and Construction Management; Hospitality, Tourism, and Sports Management; Global Affairs; Fundraising and Grantmaking; Advanced Digital Applications and Graphic Communications Management and Technology; Publishing; Professional Writing; Human Resource Management and Development, Marketing, Public Relations and Corporate Communication, Management and Systems, Project Management, and Accounting, Finance, and Taxation; Liberal and Allied Arts; and Foreign Languages, Translation, and Interpreting.
More than 100 distinguished full-time faculty members collaborate with an exceptional cadre of practitioner/adjunct faculty and lecturers to create vibrant professional and academic networks that annually attract nearly 5,000 degree-seeking students from around the globe. In addition, the School fulfills the recurrent continuing higher education needs of local and professional communities, as evidenced by close to 48,000 annual noncredit enrollments in individual courses, specialized certificate programs, workshops, and seminars. The School’s community is enriched by more than 25,000 degree-holding alumni worldwide, many of whom serve as mentors, guest speakers, and advisory board members.