Rise in US hotel closures signals healthy market

Hotel closures are on the rise nationwide, but experts say the trend is a sign of strengthening deals and an increasingly healthy economy.

Investors are increasingly letting go of properties that don’t perform, opting to sever ties rather than step in to salvage laggards. Hotel closures increased by 12 percent in 2013, according to a report from hospitality data firm STR Analytics. Nationwide, a total of 120 hotels have permanently shuttered, an uptick from 107 closings in 2012.

“During the recession, the brands in some respects looked the other way on certain property improvement requirements not being met … [but] brands are no longer tolerant of those hotels that consistently have low scores from consumers,” Suzanne Amaducci-Adams, head of law firm Bilzin Sumberg Baena Price & Axelrod LLP’s hospitality group, told Law360.

Major hotel brands shed the bottom 5 to 10 percent of their portfolios every year, Amaducci-Adams added, noting that some of the uptick could also be attributed to a regular cycle.

While the shuttered hotels varied in terms of location, with some in New York City and others in quieter markets such as Bettendorf, Iowa, many were not linked to prominent brands and were built in the 1960s and ’70s, according to STR data cited by Law360.

And the closures do not indicate a dwindling supply, experts told Law360, pointing to the booming development of new hotels catering to a strong demand. [Law360] — Julie Strickland