According to the results of the Spring 2023 Industry Outlook Survey from the Hospitality Asset Managers Association (HAMA), an overwhelming majority of members are forecasting a RevPAR recovery to 2019 levels for the U.S. as a whole to come this year or next. Almost 50% believe it will happen this year despite the many headwinds the industry faces.
“Although hotels are performing well on the whole, there is a fair amount of skepticism in the air due to the alarming rate of inflation and the Fed’s recent rate increases,” said Derrick Yee, HAMA president and VP, asset management, Placemakr. “The current uncertainty has created a displacement in the capital markets and the inflationary environment has placed pressure on hotel management teams to price accordingly and push ADR.”
Among the survey results, the top three issues concerning hotel asset managers are wage increases (65%), labor availability (57%) and demand (52%). This mirrors concerns from the previous survey last fall, when the top concerns were labor availability (86.76%), labor costs (85.29%) and demand (42.64%).
“The tough labor environment continues to plague the hotel industry, forcing higher wages and benefit costs,” Yee said. “To make matters worse, this issue does not seem anywhere near stabilization, nor does the industry seem to have a unified solution. Ultimately, technological advances will likely be introduced over time to assist in areas that historically have been more manually driven. Long term, this will likely be the best outcome from this tough period.”
Two-thirds (66%) of members also believe the U.S. economy either already is in or will slip into a recession this year. But, despite the economic uncertainty, “most asset managers have continued to see year-over-year RevPAR growth in their portfolios and continued increases in group and business travel as compared to 2021 and 2022,” said Yee. “Also, after experiencing the depths of COVID and seeing some of the industry’s worst fundamentals, many asset managers believe the worst is behind us, and a potential recession or downturn would likely not return the sector to the extremely low operating levels seen in 2020.”
For Yee, there were some survey results that he was not expecting, such as more than 90% responding that they are not expecting their hotels to hand the keys back to the lender or enter into a forced-sale situation.
“It’s a bit surprising that there is not a higher level of potential foreclosures or DILs [deeds in lieu of foreclosure],” he said. “The relatively low level of debt strain may be due somewhat to the makeup of the HAMA membership. Most members are with highly capitalized REITs, private equity firms and financial institutions. Nevertheless, within the industry overall, there are likely one-off hotel owners and smaller shops that are at or near their breaking point and may be on the brink of handing back the keys of an asset. The next six to nine months will be very interesting and telling to see if lenders become more aggressive with foreclosures and DILs, and if hotel owners are forced to make tough decisions to give up on assets due mostly to the tough interest-rate environment.”
Despite the high interest rates, almost three-quarters (74%) of membership are actively pursuing acquisitions.
Most of the survey respondents said their hotels will see an increase in RevPAR this year. This is especially true in markets like Las Vegas and resort areas in Florida, which “are enjoying historically high visitation levels and correspondingly high demand and ADRs,” said Yee.
