Lodging Market Potential Index (LMPI) - 2018

April 26, 2018

It is generally accepted that hotel development, investment and acquisition follows three basic steps (Rushmore, 2001);

1. Identifying market areas that show long term potential for hotel investment
2. Choosing a lodging product that takes advantage of the dynamics of the local supply and demand characteristics
3. Search and selection of a suitable site

Whereas, there is value in the individual data and information sources to identify potential markets for lodging investment decisions, a systematic and formal analysis of aggregate market potential can be a useful tool for hotel developers and investors. As a joint research project between The School of Hospitality Business, MSU-CIBER, and globalEDGE, we have developed this objective measure in the form of a Lodging Market Potential Index (L-MPI©)

As a first step in hotel development, investment and acquisitions decisions, this index identifies market areas that show long term potential for hotel investment. It will enable hotel developers and investors to conduct a relative comparison of the 25 largest lodging markets (as tracked by Smith Travel Research) along 10 Dimensions Dimension are measured using 30 different indicators and are weighted to determine their contribution to the overall market potential index. The Lodging Market Potential is based on a scale of 1 to 100.

The School of Hospitality Business Real Estate Advisory Council members were instrumental in working with the faculty researchers in The School, in determining the ten dimensions, associated indicators and their corresponding weights. To measure the performance of each dimension, objective, credible, reliable and quantifiable indicators were identified and are listed below the index.

View L-MPI Table View Year to Year Comparison

Dimensions and Measures of Lodging Market Potential Index for 2018

Dimension	Weight	Measures Used
Size of Economic Base	5 %	Regional GDP - 20161 Population - July 1, 20162 FIRE, wholesale trade, services employment (in thousands) - 20173 Total Employment (in thousands) - Dec 20174
Growth of Economic Base	6 %	Regional GDP Growth - 2011-20161 Population Growth - 2011-20162 Growth in FIRE - 2012-20173 Total Employment Growth - 2012-20174
Economic Stability (Standard Deviation)	5 %	Volatility in per capital real regional GDP - 2012-20161 Volatility in Population - 2011-20162 Volatility in FIRE - 2012-20173 Volatility in Total Employment - 2012-20174
Market Consumer Purchasing Power	5 %	Per Capita Personal Income - 20151 Unemployment - Dec 20174 Total Retail Sales - 20163 Eating and Drinking Place Sales - 20163
Tourism Trends	7 %	Airport Traffic - 20165
Growth in Tourism Trends	8 %	Change in Airport Traffic - 2011-20165
Performance of Commercial Real Estate	7 %	Office Space Vacancy Rate - Q4 20176 Retail Space Vacancy Rate - Q4 20177,9 Office Space Net Absorption - Q4 20178 Retail Space Net Absorption - Q4 20177,9
Hotel Market Supply and Absorption	17 %	Room Inventory Absorption - Dec 2016 - Dec 20178 New Hotel Supply Construction Pipeline - Dec 20178
Hotel Market Performance	20 %	ADR Annual - Dec 20178 REVPAR - Dec 20178 Occupancy - Dec 20178
Hotel Market Performance Growth	20 %	Annual ADR Growth - 2012-20178 REVPAR Growth - 2012-20178 Occupancy Growth - 2012-20178
Data used are those available for most recent year. 1 Source: U.S. Bureau of Economic Analysis 2 Source: U.S. Census Bureau 3 Source: Woods & Poole 4 Source: U.S. Bureau of Labor Statistics 5 Source: U.S. Federal Aviation Administration 6 Source: Jones Lang LaSalle 7 Source: CB Richard Ellis 8 Source: Smith Travel Research 9 Source: CoStar Realty Information Inc.