By VIVIAN MARINO Published: July 22, 2007 ... had to cut up the article exceeded the message limit
Indeed, in a report last month, PricewaterhouseCoopers said it expected hotel occupancy this summer to average 69.6 percent nationwide, despite higher gasoline prices. That is only slightly below last year�s occupancy rate and the second-highest level since the peak of 72.1 percent in 2001. So now a question emerges: Should smaller investors follow the big deal makers� lead and stock up on hotel shares?
Many analysts are predicting more merger activity in coming months, which could further drive up share prices. �For all the deals that have been done so far, there are probably a lot of others that are being worked on as well,� Mr. Lindemann said.
Industry analysts remain cautiously optimistic about the sector.
William C. Marks, a managing director at JMP Securities in San Francisco, agreed, noting that �most of the construction is centered around suburban markets where there is more room to build.� But he added that supply �has become more of an issue than it was a year ago.�
In last month�s report, PricewaterhouseCoopers predicted that as supply expanded, the rate of increase for daily hotel room rates would begin to decelerate � to 5.9 percent this year, on average, from 7.1 percent last year, though still the second-highest increase since 1996.
As a result, said Chris Woronka, a vice president at Deutsche Bank, the climb in revenue per available room, an important industry measurement, is likely to be around 6 percent, on average, not at strong as the rise of nearly 8 percent last year, though still historically high.
Does this mean that the best days are over for hotels?
Possibly, says David Loeb, a senior research analyst at Robert W. Baird & Company in Milwaukee. �A year ago, things were about as good as they could be; this can�t last forever,� he said. �I would definitely recommend that people think about an exit strategy, then look to take the gains they have in hotels and invest in a more diversified way across real estate.�
Still, Mr. Loeb has his favorites, like Supertel Hospitality Inc., a REIT specializing in limited-service hotel properties, a segment with relatively few new properties under development. Mr. Loeb says that he sees dividend growth potential and that the company�s shares are undervalued.