Focus on Research
Penn State Intercom......September 26, 2002

 

Fewer frills may be lodging
industry's darlings in 2003

By Gary Cramer
Public Information RESEARCH_Oneal

As flashy, upscale hotel properties from the "Decade of Greed" in the 1980s slide into obsolescence, and post-Sept. 11 changes in hotel occupancy trends run their course, midscale hotels without food and beverage services -- the rising darlings of the U.S. lodging industry since the more austere 1990s -- will become more valuable per room than their full-service sister operations, predicts a study from the University and HVS International.

Midscale hotels with food and beverage services, such as Best Western and Ramada, are experiencing an unusual boost in activity post-Sept. 11 as affluent lodgers temporarily scale back from more upscale hotels, such as Embassy Suites and Residence Inn. However, as usage patterns creep back to normal, and their fortunes decline, these briefly popular midscale hotels will look less attractive to potential buyers by next year, said John W. O'Neill, assistant professor in the School of Hotel, Restaurant and Recreation Management.

"This will leave midscale hotels that don't offer food and beverage service -- for instance, Comfort Inns & Suites and Holiday Inn Express -- the riper picks for investment," O'Neill noted. "As a group, these properties are newer than their full-service counterparts, in part because they are less expensive to build. In fact, dropping food and beverage services is emerging as the 'ideal' hotel improvement in many lodging markets in a time when, by and large, the full-service hotels are suffering from functional decrepitude and designs that are increasingly out-of-date."

O'Neill and Anne R. Lloyd-Jones, senior vice president at the hotel consulting firm HVS International, predict sales prices of hotels based on a database that O'Neill developed on 245 hotel properties for which complete operating information is available -- occupancy percentage, average daily room rate, net operating income, capitalization rate and room-revenue multiplier, as well as sale price, sale date, opening date and number of guest rooms.

According to the projections, midscale hotels without food and beverage services will increase in average value per room from $52,303 to $55,174 -- or by 5.5 percent -- from 2002 to 2003. At the same time, midscale hotels with food and beverage services will tumble in average value per room by an equal percentage, from $53,413 to $50,472.

"Investors often do not attribute much value to food and beverage outlets, particularly if those amenities are not seen as generating a profit, as is often the case," Lloyd-Jones said. "We find it ironic that hotels that are less expensive to build are seen as being more valuable than those that are more expensive to build."

The midscale-with-food-and-beverage segment is the only one for which the researchers predict a value decrease in 2003 compared to 2002. Thus, owners of midmarket properties who are considering selling may be well advised to sell in 2002, they said.

O'Neill and Lloyd-Jones' model indicates that the average U.S. hotel was worth 3.6 percent less at the end of 2001 than it was in 2000 ($71,313 per room at the end of 2001 versus $73,978 per room at the end of 2000). Based on forecasts developed prior to Sept. 11, the model indicates that in the absence of the attacks, the average hotel would have instead been worth 5 percent more at the end of 2001 than it was at the end of 2000 ($77,673 per room in 2001 versus $73,978 per room in 2000). That calculation shows a net loss in mean value of $6,360, or 8.6 percent, due to the events of Sept. 11.

Looking ahead to 2003, the model indicates that the average U.S. hotel will lose a net $11,050 in value per room by the end of 2003 as a result of Sept. 11, though most of that loss had already occurred in 2001.

"While hotels are expected to continue to lose ground compared to 'what would have been' through 2003, at this moment, it appears that 2001 is the only year in which U.S. hotel values would experience an overall year-to-year decrease," O'Neill said. "We expect valuation to increase by 1.3 percent in 2002, and our model predicts an overall value increase of 5.8 percent in 2003."


Gary Cramer can be reached at gwc10@psu.edu.

Observatories generate space movie
revealing secrets of the Crab pulsar

Just when it seemed like the summer movie season had ended, two of NASA's Great Observatories have produced an action movie. Multiple observations made over several months with NASA's Chandra X-ray Observatory and the Hubble Space Telescope have captured the spectacle of matter and antimatter propelled to near the speed of light by the Crab pulsar, a rapidly rotating neutron star the size of Manhattan.

David N. Burrowes, professor of astronomy and astrophysics, revealed the movie recently during a press conference at NASA headquarters in Washington, D.C.

The Crab was first observed by Chinese astronomers in 1054 A.D. and has since become one of the most studied objects in the sky. By combining the power of both Chandra and Hubble, the movie reveals features never seen in still images. By understanding the Crab, astronomers hope to unlock the secrets of how similar objects across the universe are powered.

"Through this movie, the Crab Nebula has come to life," said Jeff Hester of Arizona State University in Tempe, lead author of the research which Burrowes and Koji Mori, a research associate at Penn State, co-authored. "We can see how this awesome cosmic generator actually works."

Bright wisps can be seen moving outward at half the speed of light to form an expanding ring that is visible in both X-ray and optical images. These wisps appear to originate from a shock wave that shows up as an inner X-ray ring. This ring consists of about two dozen knots that form, brighten and fade, jitter around and occasionally undergo outbursts that give rise to expanding clouds of particles. Another dramatic feature of the movie is a turbulent jet that lies perpendicular to the inner and outer rings. Violent internal motions are obvious, as is a slow motion outward into the surrounding nebula of particles.

FROM THE
EXPERTS

Drought may dull
fall's vibrant foliage

There have been other years when Marc Abrams worried that weather conditions threatened the vibrancy of Pennsylvania's fall foliage.
But somehow, each autumn the leaves produced breathtaking colors despite natural adversity.

But this year's drought -- the latest in a four-year span of sharply lower-than-normal precipitation -- might be the mother of all foliage-foiling weather conditions seen by the professor of forest ecology and physiology in the College of Agricultural Sciences. With leaves on an alarming number of trees already going from green to a crispy brown, Abrams wonders if this might be the year that colors are disappointing.

"I don't want to sound too grim because over the years, I have been impressed at how resilient the fall colors on Pennsylvania trees are," he said. "A certain amount of autumn color always seems to come through no matter what. But I am concerned that this fall the persisting drought is going to have a negative impact on the foliage display."

Abrams sees a very real possibility of trees in regions where the drought has been most severe -- in the southeastern part of the state, for example -- exhibiting muted colors. "I am concerned about the colors in some areas," he said. "We are seeing that trees are severely stressed in many areas. There are signs of widespread wilting of leaves, early leaf fall and browning. Once leaves wilt, they will not go through the normal coloring process."

The ideal situation, Abrams explained, would be for two weeks of wet weather to hydrate the trees going into an "October cool down." Normal fall weather, with sunny, warm -- not hot -- days and cool to cold nights make the leaves bright. Abrams points out that a so-called Indian summer hot spell is not good for a bright foliage display.

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