July 1, 2011

You are currently viewing an old version of the Lodging Market Potential Index (MPI).

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.

Dimensions and Measures of Lodging Market Potential Index for 2011

Dimension Weight Measures Used
Size of Economic Base 5 %
  • Regional GDP (in millions) - 20091
  • Population - July 1, 20092
  • FIRE, wholesale trade, services employment (in thousands) - 20103
  • Total Employment (in thousands) - May 20114
Growth of Economic Base 6 %
  • Regional GDP Growth - 2006-20101
  • Population Growth - 2005-20092
  • Growth in FIRE - 2006-20103
  • Total Employment Growth - 2007-20114
Economic Stability (Standard Deviation) 5 %
  • Volatility in per capital real regional GDP - 2006-20101
  • Volatility in Population - 2005-20092
  • Volatility in FIRE - 2006-20103
  • Volatility in Total Employment - 2007-20114
Market Consumer Purchasing Power 5 %
  • Per Capita Personal Income - 20091
  • Unemployment - May 20114
  • Total Retail Sales (in millions) - 20103
  • Eating and Drinking Place Sales (in millions) - 20103
Tourism Trends 7 %
  • Airport Traffic - 20105
Growth in Tourism Trends 8 %
  • Change in Airport Traffic - 2004-20105
Performance of Commercial Real Estate 7 %
  • Office Space Vacancy Rate - Q2 20116
  • Retail Space Vacancy Rate - Summer 20117
  • Office Space Net Absorption (sf) - Q2 20116
  • Retail Space Net Absorption (sf) - Q1 20117
Hotel Market Supply and Absorption 17 %
  • Room Inventory Absorption - May 2010 - May 20118
  • New Hotel Supply Construction Pipeline (rooms) - May 20108
Hotel Market Performance 20 %
  • ADR Annual - May 20118
  • REVPAR - May 20118
  • Occupancy - May 20118
Hotel Market Performance Growth 20 %
  • Annual ADR Growth - 2006-20118
  • REVPAR Growth - 2006-20118
  • Occupancy Growth - 2006-20118
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