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Less Caution, More Optimism: The State of the Hotel Industry

Alan Woinski and Kim Woinski
June 6th, 2023 at 4:31 PM EDT

Skift Take

  • The hospitality industry is experiencing optimism and cautiousness, with hotels considering divesting assets and anticipating a potential distressed sale boom.
  • Hoteliers are optimistic about increasing demand, but face challenges such as high-interest rates, labor shortages, and decreased construction activity.
  • The U.S. hotel forecast shows improvements in occupancy, ADR, and RevPAR, while hotels are offering incentives to combat staffing shortages. International visitor arrivals to the U.S. continue to rise, with Mexico and Canada leading the way.

The DJIA was up 10 points while Nasdaq rose 47, the S&P 500 was also up 10 points and the 10-year treasury yield was up .01 to 3.70%. Lodging stocks were higher. AHT rose 8% to lead the group while SVC was up 6%. SLNA gave back their big gains, down -12% to close below $1 again.

Truist described the tone of the NY Lodging Conference as Less Caution, More Optimism. The various segments along with side meetings and analyst conferences seemed more like optimism over business, a whole lot of caution on development due to financing. As Truist put it, the news on PK giving back two San Francisco hotels to lenders could influence other public hotel owners to consider divesting some of their assets. Besides lending concerns, the other chorus we have seen is the long-awaited distressed sale bonanza that has been predicted since the industry finally realized Covid was serious may finally be near.

The NYU School of Professional Studies Jonathan M. Tisch Center of Hospitality and Boston Consulting Group collaborated on a survey of hotel owners, management companies, and other industry stakeholders to gauge their sentiment and prospects for the hospitality industry. The survey found while occupancy rates, ADRs, and revenues are up, new construction is down to 2015 levels. More than 70% of survey respondents anticipate demand will at least somewhat increase by end of 2023 and 42% expect significant increases in 2024. Hoteliers are looking for nominal revenue increase of 4.6% to 5.1% in 2023 and revenues to rise by about 12%. Real growth rates seem likely to exceed the rate of inflation. Hoteliers expect room rates to rise by 8.3% to 8.8% over the next 18 months. High-interest rates are spooking investors in hotels as in other commercial property sectors. 89% of hoteliers consider rates above 8% unacceptable for taking out a loan. Prolonged staffing shortages are adding to investors’ concerns; 70% of hotel owners view the hotel industry less attractive if labor problems persist. 60% of respondents reported that they are somewhat or severely short-staffed, which NYU SPS/BCG estimate costs hoteliers about 7 percentage points of revenue and two points of operating margin. 75% of respondents experienced modest or better labor productivity gains in the last three years and are optimistic about improving employment going forward. More than 60% expect continued imp