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U.S. Hotel Profitability Lags Pre-Covid Levels

Alan Woinski and Kim Woinski
May 29th, 2024 at 4:50 PM EDT

Skift Take

A new report indicates that U.S. hotel debt maturities, exacerbated by lagging profitability, high interest rates, and rising insurance costs, will drive increased transactions in 2024, especially in top gateway markets.

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The DJIA plunged another 411 points today while the Nasdaq was down 99, the S&P 500 fell 39 points, and the 10-year treasury yield was up .08 to 4.62%. Lodging stocks were lower with the new lows list getting longer. Today’s list included CLDTSVCAPLE, and VCSA, with the latter bouncing to close up 5% on the day.

Wedbush said they think investors should take advantage of the weakness in Airbnb‘s stock price, upgrading their rating to Outperform from Neutral. The firm upped their price target on ABNB to $165 from $160.

Apple Hospitality REIT said their Board of Directors approved an extension of their existing share repurchase program to July of 2025. The extended program permits the repurchase of up to $335.4 million of common shares.

JLL released a report on the impending U.S. hotel debt maturities and implications for transactions. Key findings of the report include: U.S. hotel profitability lags pre-Covid levels, particularly in top gateway markets, posing a challenge for loan maturity extensions and refinancing, thus making transacting a strong exit strategy. Persistently high interest rates are exacerbating financial stress for owners & investors facing impending debt maturities, compelling them to consider transacting. Record-high property insurance costs are lowering hotel cash flows, primarily in top gateway markets, making refinancing a challenge for maturing debt. $4.2 billion in maturing debt volume in 2024 will face critical stress in the current debt cost environment and catalyze transactions through the balance of 2024. Over the next five years, $2.2 billion of institutional quality hotel SASB loans will face critical stress and present a short-term opportunity for investors to acquire higher-quality assets in prime locations. Twenty-one of the top 25 U.S. markets that refinance at maturity in 2024 will observe moderate to critical stress, totaling $2.1 billion in debt volume. Expect top gateway markets to drive increased hotel transactions.

Lodging Econometrics released the latest on hotel development for the New York, NY market. In the Q1 2024 LE Market Trend Report for the New York market, analysts report the market has a total of 78 projects/13,549 rooms in the hotel construction pipeline, the 10th largest pipeline of any market in the U.S. Of the top 50 markets in the U.S., the New York market leads with the greatest number of hotels presently under construction standing at 47 projects/7,655 rooms. Projects scheduled to start construction in the next 12 months total 8 projects/1,079 rooms, and those in early planning account for 23 projects/4,815 rooms. Within the New York market, the three submarkets with the largest hotel construction pipelines are the New York City area, which includes Brooklyn East, the Bronx, and Staten Island, with 25 projects/2,096 rooms; the Midtown South area, with 11 projects/2,535 rooms; and the Midtown West/Times Square area with 10 projects/4,131 rooms. The market tracts with the most projects presently under construction are the New York City area with 16 projects/1,261 rooms; Midtown South with seven projects/1,515 rooms; and the JFK airport/Jamaica area with seven projects/851 rooms. During the first quarter of 2024, the New York market outpaced all others in the U.S. with the highest number of new projects added, with 12 projects totaling 1,660 rooms. The New York market was also the leading market for construction starting in Q1 2024. The market, at the end of Q1 2024, has a noteworthy amount of conversion and renovation activity with a combined total of 30 projects/8,020 rooms. LE’s total forecast for new hotel openings in the New York market in 2024 is 26 projects/2,910 rooms. In 2025, LE’s forecast for new hotel openings in the market is 17 projects/2,409 rooms.

Bentley Legacy Holdings is targeting strategic growth with the official launch of its hotel operating division, Bentley Legacy Group, the acquisition of new properties, and the hiring of industry-leading talent, Matt Berge and Ginger Van Nest, to further cement its position with the hospitality industry. Berge joined BLH as president and chief operating officer at Aimbridge Hospitality, where he most recently served as SVP of Operations. Van Nest serves BLH as the Senior Vice President of Commercial Services, overseeing sales, e-commerce and revenue management. Her 15 years of industry experience includes sales and commercial strategy roles at Aimbridge Hospitality. BLH is set to continue the remarkable growth of the past year, which included the creation of Pendant Capital, a funding and investing arm. The formation of Bentley Legacy Group as the management arm of BLH allows the company to prioritize top-notch guest experiences and financial performance for its portfolio, including the recent acquisition of The Raphael HotelAutograph Collection in Kansas City, Missouri.

Host Hotels & Resorts, Inc. entered into an agreement to acquire the fee simple interest in the 450-room Turtle Bay Resort on the North Shore of Oahu, Hawaii, including a 49-acre land parcel entitled for development, for approximately $680 million from Blackstone Real Estate. The purchase price allocation is expected to be $630 million for the Resort and $50 million for the Land Parcel, subject to final appraisal. Host intends to transition management to Marriott and flag the hotel with The Ritz-Carlton brand. The Resort features 450 rooms, including 42 bungalows; 18,000 square feet of indoor meeting space; a club lounge; six food and beverage outlets; seven retail spaces; a spa; fitness center; two golf courses; seven beaches; four resort pools; tennis and pickleball courts; an equestrian center; a working farm; and access to 12 miles of oceanfront trails. Blackstone purchased the property in 2018 for $332 million. It underwent renovations in 2020 and 2021.

Waramaug Hospitality, in a joint venture with Franklin Real Asset Advisors, acquired the Austin Marriott North, a 295-key full-service hotel located in Round Rock, Texas.

Biltmore Farms LLC intends to tear down the DoubleTree by Hilton in Biltmore Village, in Asheville, North Carolina, to make way for a series of mixed-use buildings that include residential, commercial and hotel uses connected through new sidewalk paths. The $180 million plan is for two hotels, an 88-unit apartment complex, two retail buildings, an office building and a six-story parking deck with 577 parking spaces. One hotel would be a 116-room boutique hotel with a banquet hall, spa and a rooftop restaurant and bar. The other would be a 138-room extended-stay hotel.

TPG Hotels & Resorts has been selected to manage two upscale independent properties in Washington, D.C. The Glover Park Hotel and The Graham Hotel, both located in the Georgetown neighborhood, will be managed within the INTERA Collection by TPG Hotels and Resorts. The Graham Hotel offers 57 guestrooms and suites as well as multiple food and beverage outlets. The Glover Park Hotel features 154 rooms, a fitness center, a spa, approximately 1,800 square feet of meeting space, a rooftop bar and a restaurant.

Sucre LLC wants to build a hotel just north of Miami International Airport in Miami Springs with a design that would cater to pilots. The site plan for the six-story, extended-stay Pilot House Suites calls for 132 rooms, a fitness center, laundry room, coworking space and a two-story parking garage with 121 spaces.

LaPlaya Beach & Golf Resort, a Noble House Resort in Naples, Florida, announced the completion of an 18-month restoration following significant damages incurred from Hurricane Ian in September of 2022. LaPlaya’s revitalization project encompassed 189 of the resort’s guestrooms, the complete rebuild of the famed Beach House, the restoration of its four beachside pools, poolside cabanas, food and beverage venues, SpaTerre, fitness center and The Gulf Lawn.

Kirkwood Collection announced the newest addition to its collection: The Ballard Inn, marking Kirkwood’s first venture into the Santa Ynez Valley in the heart of Santa Barbara Wine Country in Ballard, California. The Ballard Inn currently offers 15 luxurious rooms. Kirkwood Collection plans to expand the room count of this bed and breakfast to 19 and is exploring food and beverage options for the on-site restaurant. Kirkwood expands its relationship with Somera Capital Management through this acquisition, marking their second investment together.

New City Properties and Method Co. will open FORTH Atlanta, a $150-million, 16-floor development that will include a 196-room luxury boutique hotel with 39 apartment-style rooms dedicated for extended stays. There will be four separate food & beverage concepts: an outdoor pool, a flexible venue for events, a fitness center and a members-only social club. The joint venture expects to open its doors in Atlanta, Georgia in June 2024.

After two years of construction, Hotel Renegade in Boise, Idaho, has opened along with a restaurant, coffee shop and rooftop bar. Hendricks Commercial Properties and Geronimo Hospitality Group partners to develop the property.

Extended Stay America announced the opening of its newest location, in Cranberry Township, marking the Company’s first in Pennsylvania.

Marriott announced the new St. Regis Aruba Resort will make its debut in November. The 220-room St. Regis will open in the heart of Aruba‘s high-rise district, with a prime perch on the island’s popular Palm Beach. Amenities include a pool, destination spa, casino, fitness center, a signature restaurant and a pool bar grill. The resort will be the third St. Regis in the Caribbean.

Europe Highlights

Mandarin Oriental will open its much anticipated second London hotel on June 3. The 50-room Mandarin Oriental Mayfair is located within a new-build property and features multiple food and beverage concepts and a spa with a pool, fitness center, sauna, vitality pools, experience showers and steam rooms. The property will also feature 77 Residences at Mandarin Oriental Mayfair, with access to the hotel facilities and a residents lounge.

ZEL Costa Brava, the second hotel from the lifestyle hotel brand created by Rafael Nadal and Melia, will officially open on June 1. Located in Girona, Spain, ZEL Costa Brava offers 214 rooms and suites; a spa featuring a heated pool, steam rooms and saunas; multiple food and beverage options; and 46 different sports activities.

The Greenbank Hotel has acquired the freehold of The Falmouth Hotel in Falmouth, Cornwall, UK, for £7.5m. The sale was facilitated by Savills on behalf of Richardson Hotels. The hotel features 71 en-suite bedrooms; a spa with a gym, indoor heated pool, hot tub, sauna and treatment rooms; a restaurant and bar; and three function rooms. Furthermore, Richardson Hotels is looking to divest the Abbey Sands Hotel in Torquay, Devon for £1.85m. The 47-bedroom hotel features sea views, a ballroom, a restaurant and bar and gardens with an outdoor pool.


Hotel and Lodging Performance

Daily Lodging Report subscribers get full access to insights from ST200 as part of their subscription.

The Skift Travel 200, a tool from Skift Research, makes it easy to track travel industry performance as a whole, as well as within specific sectors. The Accommodations sector includes public companies in these sub-sectors: 

  • Global Hotel Brands
  • Hotel Management and Operations
  • Hotel REITs
  • Regional Hotel Brands
  • Time Shares
  • Alternate Accommodations
Alan Woinski and Kim Woinski
May 29th, 2024 at 4:50 PM EDT

Companies: Host Hotels & Resorts, Inc., Aimbridge Hospitality, Airbnb, Apple Hospitality REIT, Autograph Collection, Bentley Legacy Holdings, Blackstone, Chatham Lodging Trust, DoubleTree by Hilton, Extended Stay America, Hilton Hotels & Resorts, JLL, Kirkwood Collection, Mandarin Oriental, Marriott Hotels, Marriott International, Melia Hotels & Resorts, Pendant Capital, Richardson Hotels, Ritz-Carlton, Service Properties Trust, St. Regis, TPG, Vacasa, Zel

Locations: Aruba, Atlanta, Austin, Boise, California, England, Florida, Kansas City, London, Miami, New York City, North Carolina, Oahu, Pennsylvania, Spain, Washington DC

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