The holidays may be over, but for the U.S. hotel and motel industry, the good times could continue into 2014.
Privately held hotels and motels saw their third year of solid sales and profit growth, according to recent data from Sageworks, a financial information company, and net profit margins have turned nicely positive in recent years as tourism and business travel continue to improve from the depths of the recession.
Meanwhile, the hotel industry is seeing some turnover in investors. Private equity firm Blackstone Group has announced or executed initial public offerings for three of its hotel chains within the last six months, and sale and purchase transaction volume is growing. Indeed, industry consultants STR Analytics expect hotel-industry transaction activity to top $18 billion in 2014.
Looking at private-company financial statements filed during the 12 months ended Dec. 4, hotels and motels (NAICS 721110) generated nearly 8 percent annual growth, on average, according to Sageworks' data. That's in line with sales growth rates in 2012 and 2011 and above the 5-year average growth rate of about 4 percent. The growth rate is also noteworthy because, on average, privately held companies across all industries have seen slower sales growth over the last 12 months than in 2012.
"Hotels are consistently growing," said Sageworks analyst Brad Schaefer. "In our data, we have seen some industries, like the retail sector, take a hit in sales growth but so far, hotel industry sales are still growing healthily and haven't shown signs of stopping yet."
Profits among private hotels and motels, on average, for the last 12 months were about 33 percent higher than they were in the year-earlier period, on top of 30-plus percent growth during each of 2012 and 2011. Net profit margins, on average, approached 5 percent in the 12 months ended Dec. 4. That is on par with the industry's average net profit margin in 2012 and a turnaround from the 5-year average margin of negative 1 percent. Ratios of costs (including direct labor) and other expenses (rent, advertising) relative to sales have been stable during the last few years, so the increased sales appear to be a major factor in the improved performance.
Liquidity ratios for private hotels and motels are stable to improving, based on Sageworks' financial statement analysis. Quick (average 2.79) and current (average 3.37) ratios for the past 12 months are above the 5-year averages.
Through its cooperative data model, Sageworks collects financial statements for private companies from accounting firms, banks and credit unions, and aggregates the data at an approximate rate of 1,000 statements a day. Net profit margin has been adjusted to exclude taxes and include owner compensation in excess of their market-rate salaries. These adjustments are commonly made to private company financials in order to provide a more accurate picture of the companies' operational performance.
Sageworks, a financial information company, collects and analyzes data on the performance of privately held companies and provides accounting and audit solutions.