CBRE Raises Forecast for Hotel Performance in 2023

The DJIA fell 431 points while Nasdaq was down 215, the S&P 500 fell 57 points and the 10-year treasury yield was up another .03 to 3.84%. Lodging stocks were lower with the exception of SVC, surging 22% on the news below. The new age companies didn’t have a good day with SLNA down -18%, SOND down -10%, MCG falling -9% and VCSA with a -6% decline. The first round of REIT earnings didn’t help the group with HT down -7%, HST and PEB both down -6% and PK, RLJ, SHO and DRH down -5%. On the C-Corp side, CHH fell -5% on the day.

Earnings rolled out at a rapid pace with Hyatt, Wyndham, Host and Hersha reporting results. Hyatt reported above expectations and sounded very confident on the conference call, echoing they have yet to see the much expected slowdown in travel. They repurchased $106 million of Class A shares. Wyndham reported a clean earnings beat and the repurchase of 1.9 million shares for $133 million, a typical WYN quarter. The REITs were a bit more mixed. Host Hotels beat expectations but margins were below expectations. 2023 guidance was described by analysts as soft but everyone still loves the dry powder they have for acquisitions. HT reported in line revenue but EBITDA was a bit light. HT is in the midst of a lot of renovations which is having an impact particularly on 1Q23 guidance.

The lodging stock star of the day was definitely Service Properties Trust. SVC owns nearly 8% of Travel Centers of America and RMR has 1.67%. Travel Center agreed to be bought by BP for $1.3 billion. SVC and RMR agreed to vote their shares in favor. SVC is supposed to be coming into over $379 million on this deal.

CBRE is raising its forecast for hotel performance on the heels of industry gains in Q4 2022 and the expectation of slightly positive GDP growth in 2023. CBRE revised its forecast for 2023 RevPAR to $97.46 up $0.43 from its previous forecast. There was no change to the ADR forecast of $150.21. CBRE expects most 2023 RevPAR growth to occur early in the year, particularly in the first quarter. The new RevPAR forecast calls for 16.2% growth in Q1 2023, followed by increases in the 1.5% to 4.5% range over the balance of the year. CBRE forecasts that hotel supply will increase at a 1.0% compound annual growth rate over the next five years, below the industry’s 1.7% long-term historical average. 

Despite a slowdown in sales in the second half of 2022 due to dislocation in the debt markets, hotel investors have kicked off 2023 with record sales for quality assets in highly desirable and growing markets. According to JLL Hotels & Hospitality Group, Miami and Phoenix are two great examples of growing markets where year-end 2022 RevPAR has far exceeded 2019 performance by 24% and 19%, respectively. Other top 25 markets they see similar performance and transaction trends include Tampa, San Diego, Orlando and Orange County. Investors are buying into the thesis that long-term growth trends in certain markets will outweigh near-term capital markets dislocation. As a result, these investors are willing to buy at cap rates that are lower than the cost of debt because the growth story is so compelling. 

Project developer Location Ventures has filed plans for The Marriott Edition Hotel & Residences in Fort Lauderdale, Florida. The beachfront hotel tower will rise 23 stories and include 176 guest rooms and 25 residential units, a rooftop bar, restaurant, pool and pool deck, a gym, restaurant, lobby, conference rooms, 2,330 square feet of retail, and 195 parking spaces. 

World travelers have more reason to celebrate in 2023 as Hilton’s luxury Conrad Hotels & Resorts opened six properties around the globe. Offering multiple new luxurious spaces, Conrad’s six newest additions include: Conrad Tulum Riviera Maya, Mexico; Conrad Shanghai, China; Conrad Chia Laguna Sardinia, Italy; Conrad Nashville, Tennessee; Conrad Los Angeles, California; and Conrad Rabat Arzana, Morocco. Spanning five continents, Conrad Hotels & Resorts features a portfolio of 45 properties with an additional 22 Conrad hotels on the horizon.

Insignia Hospitality Group, Inc. announced the opening of their newest property, the Home2 Suites by Hilton in Hobbs, New Mexico. The 99-suite property features trademark Home2 Suites amenities such as Spin2 Cycle, Home2 MKT, and the Inspired Table. Additional amenities include a large outdoor area equipped with barbecue grills and a fire pit.

IHG Hotels & Resorts announced the opening of its newest Holiday Inn Express hotel in the heart of Dallas, Texas. Featuring 127 rooms, the Holiday Inn Express Dallas Downtown offers an onsite business center and meeting space. The property is owned by BMR Dallas Downtown Investment LLC and managed by Magnolia Hotel Group.

HEI Hotels & Resorts announced the addition of the Saranac Waterfront Lodge, in Saranac Lake, New York, bringing its portfolio of third-party managed hotels to 101. Centered in the Tri-Lakes region, the Saranac Waterfront Lodge is located directly on the shores of Lake Flower’s Pontiac Bay. The 93-room Lodge features a 24-boat slip marina with public restaurant docking, indoor heated pool and hot tub area, outdoor fire-pit and fitness center.

Auberge Resorts Collection announced The Inn at Mattei’s Tavern, Auberge Resorts Collection opened as a modern landmark in the historic town of Los Olivos, California. The property features 67 luxury guest rooms and cottages; five unique food and beverage venues; an outdoor pool with a poolside bar, cabanas, and firepits; a signature spa; and modern indoor-outdoor event spaces.

The former Hotel Shangri-la, in Santa Monica, California, has been renamed The Beacon after Sonder Hospitality Group and Boulevard nightlife Group have moved in as the new management. Based on the website‘s description, Sonder seems to be aiming more for a long-term stay luxury hotel. 

Magnuson Hotels announced the addition of two hotels within the Penokee Range in Upper Peninsula, Michigan, making a total of 17 Magnuson hotel locations in Michigan. The Magnuson Hotel Ironwood is a brand conversion from Choice Hotels and The Ironwood Hotel is a member of the Magnuson Hotels Independent Collection. 

A Chicago consulting firm has completed a feasibility study recommending that the Soaper Building in downtown Henderson, Kentucky be redeveloped into a 50-room boutique hotel featuring either a basement speakeasy or a rooftop bar and restaurant. According to the report by Hunden Strategic Partners, converting the Soaper into a premium hotel would draw both corporate and tourism clients, providing more business for downtown restaurants, retailers, and entertainment venues. The Soaper Building is the most ideal location for hotel development in downtown Henderson. It is of sufficient size to accommodate the recommended number of rooms, includes a successful first-floor restaurant, and provides the opportunity for both additional rooftop and basement level guest experiences. Notably, the Soap is located within a block of Henderson’s three major downtown tourism draws and those will be augmented by the opening of the 58-acre Henderson Sports Complex. The study was commissioned by the Henderson Tourist Commission.

LuxUrban Hotels Inc. signed an agreement with NusaTrip, Indonesia’s first IATA-certified online travel agency, under which LuxUrban Hotels will become the preferred hotel partner for NusaTrip users traveling to the United States from Southeast Asia. The preferred partnership, which is expected to go live by the end Q1 2023, will include preferential ad placement for LuxUrban properties, reduced commissions, and bundled hotel/air travel offers with more than a dozen airlines, including China Airways, Korean Air, Philippines Airlines, and British Airways.

Sofitel Legend expanded its esteemed offering of legend locations with the new Sofitel Legend Casco Viejo in Panama City, Panama, joining the other five Legends. As with others in this exclusive group of properties, Sofitel Legend Casco Viejo is located in a historic site, the Club Union of Panama, built in 1917. Sofitel Legend Casco Viejo offers 159 rooms and suites; The Sofitel Spa with a gym, spa and infinity edge pool; and multiple food and beverage venues.

Hyatt Hotels Corporation announced the opening of Dreams Flora Resort & Spa, the newest addition to the Inclusive Collection. The resort marks the expansion of Inclusive Collection’s presence in the Dominican Republic to 12 total resorts and is the fifth Dreams Resort & Spa in the Caribbean destination. Situated on the beach of Cabeza de Toro, Dreams Flora Resort & Spa touts 520 suites, various delectable dining options, numerous bars, multiple pools, an Explorer’s Club for Kids, the Core Zone Teens Club and The Dreams Spa by Pevonia.

Personnel Move

The Living Company announced the promotion of Alan Fang to President. Fang will serve as President in addition to continuing in his current position as Chief Operating Officer. Paul Dougan remains Chief Executive Officer. Fang joined The Living Company as Chief Operating officer in early 2020, overseeing Global Manufacturing and IT. Under the new structure as President and COO, Fang will now oversee Finance, Accounting and E-commerce. 

Europe Highlight

Hilton announced the signing of Palacio de Godoy Cáceres, Curio Collection by Hilton in Spain, following a franchise agreement with Scipion Real Estate and management company Panoram Hotel Management. The hotel will offer 72 guest rooms including eight suites, a restaurant and bar, 1,000 square meter garden, meeting and events space, a spa, fitness center, indoor pool and rooftop bar.