During the recent Hunter Hotel Investment Conference, Mitch Patel. founder/CEO, Vision Hospitality Group, moderated the “Market Overview: Financial Analysis and Forecast” panel, where industry leaders discussed the current economic climate and what they thought would happen over the next 12 months.
“It’s really difficult to predict what’s going to happen,” he said. “Buyers are trying to be more realistic and telling the ask that they need to change their thinking, and that’s where we’ve been really since third or fourth quarter of 2022 when interest rates spiked. We know that GDP is directly correlated to hotel demand, so if GDP goes up, hotel demand is going to go up. Right now, the prognosticators are saying that that GDP growth is likely to come down.”
Turning to Daniel C. Peek, president, JLL Hotels & Hospitality Group, Patel pointed out that “Consumers in a discretionary business do not like uncertainty,” and asked the JLL executive how the travel landscape is affecting the hotel industry.
“A big thing we focus on when we talk about travel demand is corporate and consumer confidence, and I think both of those have taken a short-term hit,” he responded. “Inflation has taken a toll in the economy sector, but one of the things we keep thinking about is it’s going to go away.”
Teague Hunter, president/CEO, Hunter Hotel Advisors, believes there are some “choppy” times ahead, adding, “There’s been tons of government spend, and that’s about to evaporate, which is going to have impact and pain everywhere. The government printed a ton of money, and that money fell into the hands of capital owners, and it didn’t quite trickle down.”
When Patel asked Greg Friedman, managing principal/CEO, Peachtree Group, what scares and excites him the most over the next 12 months, he responded, “You look at the new administration and what it’s trying to accomplish with tariffs. There are factors that could potentially drive us into an economic recession, which could help bring rates down. But it’s going to be really tough to operate in this type of environment. You’re probably going to see some business pull back at the hotel level. On the flip side, at some point, I think you’re going to see the transaction market open up for us to be able to go buy assets, and that’s what gets us excited.”
Later on in the session, Peek was asked his thoughts on what’s going to happen to interest rates in the next 12 months.
“I would think we probably get one or two cuts in the second half of the year from the Fed, which will flow through on the floating rate side,” he said. “I don’t know how much movement there is on the Treasury side, just given some of the underlying dynamics of deficit and spend. I would say we’ll probably see a little bit further reduction. But if the economy were to be stronger than everyone anticipates, then we probably won’t see much rate reduction.”
