Hotel Report: Hotel market boom expected to continue for three more years

Hotel construction is booming. Jobsite spending has more than doubled since the beginning of last year, and the value of starts increased 70% since early 2006, according to Reed Construction Data.

Market expansion will continue for three more years, but the pace of growth will gradually fall back to match nominal GDP growth. This is the usual late-cycle pickup in a volatile market augmented by the growing importance of hotels that are themselves destinations and by a surge of foreign visitors from rapidly expanding foreign economies drawn to the U.S. by a persistent 3-5% annual depreciation of the dollar.

The hotel burst is ebbing because occupancy rates have stabilized with the opening of the first surge of new rooms. This has also halved the annual gain in revenue per available room from the 10% peak a few years ago.