Analyst Expects Hotel REIT RevPAR Acceleration in First Half of 2015

C. Patrick Scholes, managing director with SunTrust Robinson Humphrey, joined REIT.com for a video interview at REITWorld 2014: NAREIT’s Annual Convention for All Things REIT at the Atlanta Marriott Marquis.

Scholes said healthy fundamentals in the hotel REIT sector are likely to continue into 2015, based on a favorable supply-and-demand balance. Revenue per available room (RevPAR) should accelerate in the first half of 2015, according to Scholes.

Scholes also commented on the trend of hotel REITs pruning their portfolios. He observed that the wave of hotel REITs reconfiguring their assets has yet to be completed.  “It’s not completed until you see some of these REITs selling to private equity,” said Scholes, adding that he does not expect this to occur before 2016.

Scholes noted that his general takeaway after speaking with hotel REITs attending REITWorld 2014 was that most companies are not aggressively looking to buy new lodging assets. Several hotel REITs have recently completed major capital expenditure projects, he said, and they are “milking the growth from the investment they have made.”

Meanwhile, Scholes addressed the topic of changing consumer preferences in the hotel industry and the ability of REITs to adapt.

“There’s only so much a REIT itself can do,” Scholes said. “It’s more about selecting the manager for your property, or making sure the one you selected five or 10 years ago can keep up with these trends.”

Scholes added that until now, publicly traded hotel REITs have not been actively targeting their strategies toward the millennial generation. “But I would expect going forward you’d start to see that,” he said.