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Q3: A Strong Quarter for Group Business in 2024

Fri, 22 Nov 2024 22:01:59 GMT

Cendyn and Amadeus’ Hospitality Group and Business Performance Index reached its highest rating in four quarters during Q3 2024, driven by increased room nights and average daily rates (ADRs). The index reported an overall health metric of 107.9% year-over-year, underscoring strong group performance, according to the companies’ report released Wednesday.

Key Highlights:

Top Markets: Among the top 25 markets, Houston, New Orleans, and Chicago led the way, with overall health metrics of 120%, 118%, and 114.8% year-over-year growth, respectively. All markets surpassed the 100% mark, except San Francisco.
Performance Drivers: The quarter benefited from a 1% increase in room nights and a 5% rise in ADR, marking the eighth consecutive quarter of growth.
Event Metrics: Hotels hosted an average of 136 attendees per event, with a slightly reduced average event space usage of 3,766 square feet compared to 4,025 square feet in Q2.

Industry Insights:

The meetings and events sector proved pivotal, with hotels of all sizes experiencing growth. National associations were the top drivers of events, followed by weddings, education, healthcare, and nonprofits. Phoenix saw the largest growth in meetings volume in October, as reported by Cendyn, which recently acquired Knowland.

Hotel Performance Boost:

Group travel significantly boosted RevPAR for major hotel operators such as Marriott International, Hyatt Hotels, and IHG Hotels & Resorts. Las Vegas saw notable group contributions to hotel performance, as highlighted by MGM Resorts, Caesars Entertainment, and Wynn Resorts in their Q3 earnings calls.

Marriott CEO Anthony Capuno described the group business performance as "really encouraging" during the company’s earnings call.

San Francisco's Struggles:

Despite the overall positive trends, San Francisco continues to underperform. Downtown hotels face declining property values amid reduced demand and heightened crime, setting it apart from other top markets.

With robust group business metrics and continued opportunities in the meetings and events industry, the hospitality sector looks poised for further growth in the coming quarters.

LivSmart Studios: A New Extended-Stay Option for Modern Travelers and a Flexible Workforce

Wed, 30 Oct 2024 03:23:14 GMT

The hotel industry is poised for significant growth this year, driven in part by the popularity of extended-stay accommodations. Projected to reach over $426 billion in global revenue by the end of 2024, the industry is expected to maintain an annual growth rate of 3.7%, with a market value nearing $512 billion by 2029.

Extended-stay hotels cater to travelers who need well-equipped lodging for extended periods, often weeks or even months. With remote work on the rise since the pandemic, these accommodations are in high demand for their flexibility. Hilton, a long-time leader in hospitality, has expanded its portfolio with LivSmart Studios — a new brand of studio apartment-style suites designed for longer stays, featuring designated areas for cooking, working, and relaxation.

“Through thorough research, we identified a gap in our portfolio and the broader hospitality market in the rapidly growing $300 billion workforce travel segment,” shared Isaac Lake, LivSmart Studios' brand leader. “This unique offering provides apartment-style accommodations for travelers staying 20 nights or more and presents an appealing investment opportunity for developers looking to diversify with Hilton.”

Hilton has been in the extended-stay market for over 30 years, but interest surged during the pandemic as healthcare workers filled rooms for extended periods. Today, remote workers, families, and vacationers are increasingly drawn to these accommodations. Launched in 2023, LivSmart Studios offers an affordable midscale option with practical amenities, appealing to property owners seeking a cost-effective, easy-to-operate hotel.

Lake emphasized that guests today value a home-like experience, from preparing meals to enjoying productive and spacious layouts. LivSmart Studios has been designed with these needs in mind, offering a reimagined extended-stay experience.

“LivSmart Studios incorporates a warm, inviting design with adaptable layouts that balance comfort and productivity,” Lake explained. The concept also features a nontraditional lobby experience with retail, fitness, and other conveniences for a seamless, extended stay.

This model has shown strong growth as workforce mobility increases across industries, and it is expected to attract younger professionals starting out in careers that require flexibility. “Our concept is ideal for long-term business travelers, those on work assignments, and insurance and construction professionals needing convenient, extended accommodations,” Lake said.

The first LivSmart Studios, set to open in 2025 in Kokomo, Indiana, will feature 137 units with kitchens, storage, fitness amenities, and a laundry facility. Early feedback from hotel owners and potential guests has been enthusiastic, which has contributed to Hilton’s inclusion in Fast Company’s 2024 list of Most Innovative Companies.

Lake expects continued success in the extended-stay sector, citing the importance of partnering with hotel owners and developers from the outset. “We’re in active discussions on more than 350 development projects, with many developers interested in multiple LivSmart Studios locations,” he said. “The brand’s adaptable footprint makes it a fit for urban, suburban, and secondary markets alike.”

Hilton is looking forward to future expansions and sees LivSmart Studios becoming a mainstay in multiple markets worldwide.

Top Hospitality Trends from 2024’s Lodging Conference

Thu, 24 Oct 2024 22:16:00 GMT

Hotel investment is picking up, guest demand for immersive experiences is growing, and extended stay accommodations continue to be a major focus. However, the industry still faces significant challenges, particularly in the areas of labor and technology.

At the recent Lodging Conference in Phoenix, hospitality leaders, including CEOs, brand executives, and industry experts, expressed optimism about the hotel sector's future. The conference featured discussions that highlighted both opportunities and hurdles in the evolving landscape of hospitality.

Rising Hotel Investment Activity

Kevin Davis, Americas CEO for JLL Hotels & Hospitality Group, shared that hotel deal activity is expected to accelerate in the final months of 2024, thanks to anticipated interest rate cuts. As we head into 2025, Davis predicts this momentum will continue, likening the investment climate to a "boulder rolling down a hill" — gradually picking up speed as hotel transactions increase.

Other industry leaders echoed this sentiment. Greg Juceam, CEO of Extended Stay America, pointed out that clarity around the upcoming U.S. elections, significant refinancing opportunities, and new property improvement plans will fuel the investment boom. Meanwhile, Dave Pollin, co-founder of The Buccini/Pollin Group, noted that the maturity of billions in hotel loans will drive transactions over the next 18 months, setting the stage for robust deal activity.

According to JLL research, approximately $5.8 billion in U.S. hotel loans will mature by the end of 2024, further spurring transactions. Highgate CEO Arash Azarbarzin emphasized that 2025 will be an exciting year for investment, given the low supply of new hotel construction and favorable interest rates.

Growing Demand for Experiential Stays

Another major trend highlighted during the conference was the increased demand for experiential stays. Today’s travelers are seeking more than just a place to rest their heads — they want unique, memorable experiences that immerse them in the local culture or environment. As a result, hotels are increasingly focusing on creating tailored, innovative experiences to meet guest expectations.

Extended Stay's Continued Popularity

Extended stay properties remain a bright spot in the hospitality sector. Industry experts at the conference referred to this segment as the "darling" of the industry, given its consistent performance and investor interest. With flexible accommodation options that appeal to both leisure and business travelers, extended stay properties are well-positioned to capture market share in the years to come.

Challenges with Labor and Technology

While optimism abounded, conference participants also acknowledged persistent challenges, particularly in the areas of labor and technology. The hospitality industry continues to face staffing shortages, making it difficult for hotels to meet service expectations. Additionally, there is growing pressure to adopt new technologies that can enhance operational efficiency, improve guest experiences, and address evolving demands, such as contactless services and personalized digital interactions.

Industry leaders recognize that addressing these challenges is crucial for long-term success. As they navigate the complex landscape of labor shortages and tech innovation, many are focused on finding creative solutions to stay competitive.

Looking Ahead

Overall, the 2024 Lodging Conference reinforced the sense that the hospitality industry is on the brink of a new era. With rising hotel transactions, increased demand for experiential travel, and the continued strength of the extended stay market, there is plenty of optimism for the future. However, tackling labor and technology challenges will remain key priorities for industry leaders as they strive to sustain growth and capitalize on the opportunities ahead.

Impact of Interest Rate Cuts on Real Estate Cap Rates

Thu, 17 Oct 2024 20:30:11 GMT

Source: CBR E

Now that the Fed is starting to cut interest rates, how will real estate capitalization rates react? Conditions that facilitate changes in short-term policy rates influence the long-end of the yield curve, which in turn most influences real estate investment activity.

A CBRE Econometric Advisors (CBRE EA) review of cap rates since 1995 shows that for every 100-basis-point change in the 10-year Treasury yield, cap rate movements range between 41 basis points (bps) on average for industrial assets to 78 bps for retail assets. Office cap rate movements averaged 70 bps, while those for multifamily assets averaged 75 bps.

The fact that industrial assets were the least sensitive to long-term interest rates can likely be explained by the level of investor demand for logistics assets throughout the period. Prior to 2010, industrial assets were not in such high demand, leading to less cyclical cap rate compression. Following the COVID pandemic, however, strong fundamentals that supercharged demand for the sector kept industrial cap rates from climbing as much as those of other sectors. This structural shift in demand for industrial space boosted NOI growth and reduced risk premiums.

What moves cap rates?

CBRE believes that the U.S. economy will avoid a recession as inflation continues to fall toward the Fed’s 2% target. We expect that the 10-year Treasury yield will average below 4% for the rest of 2024 and drift down to the mid-3% range in 2025. Treasury yields at that level will put downward pressure on cap rates as the lower cost of capital supports investment activity and asset values.

Additionally, this soft-landing scenario should support resilient commercial real estate fundamentals (excluding the office sector) that drive rent growth and returns from income, putting additional downward pressure on cap rates. Other factors that influence cap rates include the risk premium (yield spread vs. risk-free bonds), GDP, foreign exchange rates, inflation and the Fed balance sheet’s impact on market liquidity (Figures 1 and 2). Structural changes, such as the impact of remote working on the office sector, can have a great effect on cap rates.

Figure 1: Factors That Influence Cap Rates

Figure 2: Sensitivity of Cap Rates to Macro Factors

Broader Factors & What to Expect

While Treasury yields and rents have the most influence on cap rates, other significant factors include the risk premium and GDP growth. For example, the spread between cap rates and Treasury yields rises during economic slowdowns and declines during recoveries. CBRE EA forecasts that cap rates likely will fall more slowly than past cycles and stabilize at higher levels relative to pre-pandemic cap rates due to interest rates remaining above pre-pandemic levels. This is driven by outsized federal budget deficits and continued economic growth, among other factors.

Figure 3: Cap Rates & 10-Year Treasury Yields

We expect cap rates to begin compressing slowly in Q4 2024 and more noticeably in 2025. From their peaks to the end of 2025, we expect industrial cap rates to fall by 40 bps, retail by 35 bps, multifamily by 25 bps and office by 20 bps.

In the long term, we expect industrial and multifamily cap rates to stabilize at 4.5%, office cap rates at 5% and retail at 4.6%. All long-term stabilized cap rates will be higher than their pre-COVID levels.

Consequently, we recommend that investors consider broader macro drivers that influence Fed policy, rather than the speed or magnitude of the cuts themselves, to understand cap rate movements.

We’ve already started seeing some compression in multifamily and industrial cap rates and believe there will be notable variations both across and within various property types, even within the highly challenged office sector. Although macro factors determine the direction of cap rate movements, the extent of those movements can be influenced by the relative strength of each market and asset. Consequently, we think market and individual asset selection will be even more important considerations for investors during the current cycle.

You can access the original article here: Impact of Interest Rate Cuts on Real Estate Cap Rates

Field & Stream Lodge Co. Opens First Property in Montana: Embrace the Great Outdoors

Tue, 08 Oct 2024 16:38:31 GMT

Outdoor-centric travel is on the rise, and Field & Stream Lodge Co. is at the forefront of this growing trend. A collaboration between Starwood Capital Group, AJ Capital Partners, and Field & Stream, the brand is set to bring unique outdoor experiences to travelers across the U.S. with its first location now open in Bozeman, Montana.

The launch of Field & Stream Lodge Co. marks the beginning of a new chapter in outdoor hospitality. With an ambitious target of opening 35 properties across the United States, the brand is dedicated to creating locations ""rich in natural experiences"" that encourage guests to explore and embrace the outdoors. The Bozeman property, already accepting reservations for winter 2025, offers an enticing combination of modern comforts with the charm of traditional hunting and fishing lodges.

An Unforgettable Montana Experience

Located just one mile from downtown Bozeman and only two hours from Yellowstone National Park, the Field & Stream Lodge Bozeman is perfectly positioned between breathtaking rivers and mountains. Whether you’re into biking, hiking, fly fishing, or skiing, this year-round destination offers a wide range of activities to cater to every outdoor enthusiast.

Barry Sternlicht, chairman and CEO of Starwood Capital, said it best: “The property will deliver a unique blend of modern, affordable lodging that perfectly complements the environment surrounding it.” This blend of classic outdoor charm and contemporary amenities is sure to create an exceptional guest experience.

A Strong Partnership for a Strong Brand

The Field & Stream Lodge Co. brand is a collaborative effort, bringing together the expertise of AJ Capital Partners, the force behind the Graduate Hotels brand, and Starwood Capital Group. Launched in 2022, the partnership aims to uphold Field & Stream's 153-year legacy of outdoor expertise and experience while offering guests high-quality design and affordable lodging.

With 35 properties planned across the United States, totaling over 4,200 rooms, Field & Stream Lodge Co. is building an outdoor lifestyle hospitality brand that resonates with a growing number of travelers seeking nature, adventure, and affordability.

Riding the Wave of Outdoor-Centric Hospitality

In recent months, other major hotel brands have also moved towards outdoor-focused accommodations to meet the rising demand for adventure travel. Hilton has partnered with AutoCamp, while Hyatt Hotels Corp. has teamed up with Under Canvas, demonstrating a broader industry trend of expanding into nature-focused experiences.

The Bozeman lodge is the first step for Field & Stream Lodge Co. in its mission to redefine outdoor lodging in America. Whether you’re a seasoned adventurer or simply someone looking to escape to the great outdoors, Field & Stream Lodge Co. promises an experience that connects you to nature like never before.

Field & Stream’s Legacy Meets Modern Innovation

The brand also attracts attention from other corners of the outdoor lifestyle industry. Earlier this year, country music stars Eric Church and Morgan Wallen acquired Field & Stream magazine, re-launching it as a media and apparel company. While the exact involvement of Church and Wallen with the lodges is unclear, the renewed interest in the Field & Stream brand highlights its relevance and appeal in today's culture of outdoor exploration.

Looking Ahead

Field & Stream Lodge Co. offers the perfect opportunity to experience the outdoors without sacrificing comfort. With Bozeman now open, adventure awaits. Whether it’s a weekend getaway or an extended stay to explore Yellowstone, Field & Stream Lodge Co. aims to make every guest's outdoor adventure memorable.

If you’re ready to embrace the great outdoors with a mix of timeless tradition and modern convenience, make your reservation at Field & Stream Lodge Bozeman today."

The Struggle for Affordable Lodging in NYC: Airbnb Crackdown Leaves Tourists and Hosts Reeling

Fri, 04 Oct 2024 13:13:05 GMT

Since New York City initiated its crackdown on short-term rentals like Airbnb six months ago, finding affordable lodging has become more challenging and expensive. The number of available Airbnb listings has plummeted by over 15,000, according to an analysis by AirDNA. As a result, travelers are either wary of sharing quarters with hosts or uncertain whether their rental is even legal. Hotels, meanwhile, have taken advantage of reduced competition, raising their prices.

Rebecca Norman, who plans to visit New York from the U.K. with her family in October, found that an average hotel room with a pullout couch would cost $4,400 for a five-night stay. "I look at all these hotels, and what I want isn't at the price I want," she said.

Despite the shrinking supply, legal Airbnb hosts have seen their bookings fall, forcing them to drop rates. Several other cities facing housing shortages are watching New York's example, as Christian Klossner, the executive director of the city's Office of Special Enforcement, explained that the main goal is to uphold laws that protect both housing and residents.

With New York's restrictions, neighboring areas like Jersey City and Hoboken in New Jersey have become attractive alternatives for travelers seeking Airbnb accommodations. Since September, New York City has required short-term rental operators to obtain licenses, which led thousands of hosts to pull their listings from Airbnb. The number of Airbnb units available for less than 30 days dropped from about 21,500 in August to just 3,280 in February, according to AirDNA.

To offer a legal Airbnb listing in New York, hosts can’t rent out an entire apartment or home, and they must be present during the stay. This requirement has significantly reduced the availability of full-unit rentals. In December 2023, city hotels charged an average of $393 per night, an increase from $355 in the previous year. Comparatively, Airbnb and Vrbo listings for entire homes averaged $404 a night, while private rooms averaged $157, according to AirDNA data.

Hotel prices have risen due to a variety of factors, including reduced competition from Airbnb, the use of 16,500 hotel rooms for housing migrant arrivals, and development regulations, according to Vijay Dandapani, CEO of the Hotel Association of New York City. Yotel New York Times Square saw a boost in business through Airbnb, with a 36% increase in occupancy compared to the same period the year before.

Despite the city’s efforts, unregistered short-term listings have proliferated on third-party sites such as Craigslist and Facebook. The boom in Airbnbs began when the city faced a significant shortage of affordable rentals, leading many to list properties on Airbnb instead. Jonathan Miller, author of NYC rental reports from Douglas Elliman, noted that even with more units becoming traditional rentals, it wasn't enough to curb rent increases.

For travelers like Chris Conte, a New Jersey resident, finding affordable lodging in the city has become more challenging. Conte, who often booked Airbnb stays near concert venues, ended up splitting a $345-a-night Holiday Inn Express room in Queens after finding limited options on Airbnb. “If it’s for the happiness of the city, then so be it, we have to adjust,” he said.

Legal Airbnb hosts have had to change their strategies. Kat Casey, who owns a two-family home in Astoria, Queens, with her husband, intended to use the income from their rental unit to support maintenance costs. Under the new regulations, guests stay in a private room in a shared unit rather than a private apartment. As a result, Casey’s future bookings are down 50% from last year. “There’s a lot more cancellations, a lot more questions, and a lot more anxiety with guests than previously,” she said, noting that the regulations don't support families like hers.

Similarly, Aminah West, who previously managed multiple rental units in Brooklyn, lost significant income as owners pulled their listings post-enforcement. Though she still manages a single licensed rental, West has had to drop her nightly rate from $120 to $90 to attract guests. Despite the challenges, she remains motivated to continue hosting, viewing it as a way to connect people from around the world. “Beyond the economic case of it, I get to build a bridge to, and through, community for people around the world,” she said.

New York City's stringent regulations have reshaped the short-term rental market, creating hurdles for both visitors and hosts. With limited lodging options and soaring hotel rates, travelers and residents alike must navigate a new landscape that prioritizes housing stability over short-term convenience.

Anticipated Interest Rate Cuts and Their Impact on the Hotel Industry

Wed, 25 Sep 2024 02:03:36 GMT

For many hotel owners and investors, the wait may finally be over. The U.S. Federal Reserve is expected to initiate a series of gradual interest rate cuts starting this week. While the markets have factored in this possibility, the exact number and size of cuts remain to be seen.

Since March 2022, the Fed has raised interest rates 11 times, with the goal of cooling the job market and bringing inflation closer to its 2% target. These increases took the federal funds rate from 0.25%-0.5% to its current range of 5.25%-5.5%. Oxford Economics predicts the Fed will cut interest rates by 25 basis points this week and continue with similar reductions every other meeting through 2025. Their forecast suggests two cuts by the end of 2024, lowering the policy rate to 4.88%, with further cuts expected to reach 100 basis points by the end of 2025.

Zach Demuth, global head of hotel research at JLL, notes that forward curves have already priced in at least 50 basis points of cuts for the rest of the year. Even though these cuts have been anticipated, their arrival is still welcome news. The Fed’s signaling of rate reductions has already stimulated market activity, as more buyers are entering the market and capital is moving off the sidelines. Demuth anticipates that lower interest rates will significantly boost transaction volume in the coming months.

Raymond Martz, co-president and CFO of Pebblebrook Hotel Trust, believes that these rate cuts will serve as a catalyst for increased transaction activity in 2025. Additionally, spreads on commercial mortgage-backed securities (CMBS) debt have been narrowing, making borrowing costs more affordable. This will provide a more favorable environment for underwriting, encouraging buyers to proceed with more confidence.

While the first 25-basis-point cut may not make a substantial difference, Martz points out that the Fed’s intention to return to a more neutral rate is a positive indicator for the market. The projected 220 basis points in cuts by the end of 2025 will likely boost confidence and further fuel transaction activity.

Despite the promising outlook, Isaac Collazo, vice president of analytics at STR, warns that there will be a lag in hotel development following the initial rate cuts. Of the 761,000 hotel rooms in the U.S. pipeline, 43% are in the planning phase, and many of these projects will need time to secure financing. Rate cuts will help free up capital, but the full impact on development may take years.

Collazo also highlights the challenges faced by developers, such as high material costs and labor shortages, which may delay project progress. Additionally, while lower interest rates will help reduce borrowing costs, some lenders are still requiring significant equity in deals, further complicating the development process.

In the broader economic landscape, the anticipated rate cuts may encourage companies to invest more, potentially spurring business travel and driving demand for hotels. However, Collazo notes that the positive effects of lower interest rates will take time to reach consumers, especially those dealing with high levels of credit card debt.

While higher-income households may benefit from an improving housing market, lower- and middle-income earners are likely to struggle with their debt burdens for some time. Collazo emphasizes that it will take time for these consumers to reduce their debt and return to their previous levels of spending.

Overall, the expected interest rate cuts offer hope for the hotel and investment markets, but their full impact may not be felt for years. Developers, investors, and consumers alike will need to be patient as the economy adjusts to the new rate environment.

Midweek Hotel Demand Trends: Insights on Business Travel Recovery

Wed, 18 Sep 2024 14:58:17 GMT

Inflation has boosted hotel rates, but occupancy has yet to fully recover.

NASHVILLE, Tennessee – Over the past few years, midweek hotel demand has shown a steady increase, with transient demand recovering faster than group demand. Despite this trend, the group segment is in a stronger position to reach full recovery, as factors like office attendance and new hotel supply pose challenges to transient demand growth.

Before the pandemic, Wednesdays were the peak day for U.S. hotel occupancy, driven primarily by corporate travelers. Between 2010 and 2019, Wednesday’s average combined occupancy rate of 66% was the highest for any weekday, reflecting consistent growth, particularly in the second half of the decade.

The pandemic, however, caused a drastic decline. As offices shut down and business travel dwindled, Wednesday occupancy, which stood at 68.4% in 2019, plummeted to 43.9% in 2020.

During the "Wednesdays are the New Wednesdays: Exploring Midweek Demand" session at the Hotel Data Conference, CoStar’s National Director of Hospitality Analytics, Jan Freitag, highlighted the sharp drop in occupancy.

"We went from selling 7 out of 10 rooms to just 4 out of 10," Freitag said. "But that 40% occupancy was actually a false positive because the second quarter was even worse."

Average daily rates (ADR) followed a similar trajectory, dropping by $32 year-over-year from 2019 to 2020. In 2019, 28.4 million transient hotel rooms were sold on Wednesdays, but that number fell to 12.7 million in 2020. Group bookings saw an even sharper decline, with 15.4 million group rooms sold on Wednesdays in 2019, falling to just 4.3 million in 2020.

Current Trends for Wednesday Occupancy

As of June 2024, Wednesday occupancy stands at 62.1%, slightly down from 62.5% the previous year. While still in recovery mode from the 68.4% occupancy seen in 2019, Freitag explained that the lag is expected given the current market dynamics.

"Demand hasn’t fully returned, and while the industry wasn't operating, new hotels were being built," Freitag said. "It will take some time to not only recover 2019 demand but also absorb the additional supply."

Since 2019, the supply of hotel rooms on Wednesdays has grown by 3%. Although supply has remained muted over the last eight quarters, this may benefit hotels aiming to boost occupancy rates.

In contrast to occupancy, rates for Wednesdays recovered to 2019 levels by 2022 and are now 50% higher than in 2020.

"On the rate side, it’s been a success story," Freitag said, attributing the faster recovery of rates to inflation. From 2016 to 2019, ADR grew by 6%, and from 2022 to 2023, it increased by the same percentage.

The Outlook for Business Travel

Midweek demand from Monday through Thursday remains below pre-pandemic levels, with transient demand down 3% and group demand down 8%. Despite this, Freitag remains optimistic about group demand recovery.

"I’m confident we’ll continue to see solid growth, especially in the latter part of the year, with strong numbers expected in September and October," Freitag said.

However, the outlook for transient demand is less certain. Even though transient demand is nearing 2019 levels, office attendance remains weak, with Kastle Systems’ Back to Work Barometer indicating that office occupancy is only at 50% of January 2020 levels. This reduced office presence has led to fewer business trips for meetings.

"If people aren’t in the office, there's less reason to travel for meetings," Freitag said. "You’re not going to fly from Nashville to New York to meet with someone working remotely from their home in Hoboken. That meeting will happen on Teams or Zoom."

In major markets like New York City, San Francisco, and Chicago, an increase in available class-A office space has correlated with lower upper-upscale hotel occupancy, highlighting the connection between business travel and hotel performance.

This combination of reduced business travel and increased hotel supply makes it difficult for downtown hotels to regain pre-pandemic occupancy levels.

"On the transient side, I still have questions about when we’ll fully recover," Freitag said. "But for group travel, it’s not a matter of if, but when."

Exploring the Fears and Opportunities of AI in the Hotel Industry

Thu, 29 Aug 2024 20:15:40 GMT

NASHVILLE, Tennessee – Artificial intelligence (AI) has become a popular topic in the hotel industry, but there are still many questions about what it really is, how soon it will affect the industry, and how it can be used effectively.

At the recent Hotel Data Conference, during a panel titled “AI in Hospitality: How Will It Affect You?”, Kurien Jacob from Highgate Technology Ventures explained that AI and machine learning are modern versions of older machines designed to do specific tasks. He encouraged the industry not to fear AI but to see it as a tool that can significantly boost productivity.

Todd Brook from Unchained highlighted that much of the fear surrounding AI comes from not understanding how it works. He gave an example of using AI to analyze documents like Word files or Excel sheets, emphasizing that while using AI is simple, gathering the right data for it is more challenging.

Even though AI is similar to past technologies, some people are still hesitant to embrace it fully. Arlene Ramirez from CoralTree Hospitality suggested that the industry should focus on how AI can improve productivity rather than worrying about it taking jobs.

Lisa Targonski from Elder Research added that AI allows employees to develop new skills and get rid of repetitive tasks. She pointed out that other technologies in the past didn’t eliminate jobs but changed how people worked.

However, Kurien Jacob noted that AI might reduce the number of people needed for certain tasks because AI will handle more routine work, allowing humans to focus on creative and strategic tasks.

Todd Brook added that in the near future, the real concern might not be losing jobs to AI but being outpaced by colleagues who know how to use AI tools effectively.

AI Concerns and Risks

One major concern with AI is whether its outputs can be trusted. Arlene Ramirez said that users need to ask the right questions and understand their business to get reliable results from AI.

Todd Brook suggested that detailed questions, ideally about 200 words long, produce better AI responses. He emphasized the importance of checking AI’s work to ensure accuracy, as AI is meant to assist but not replace human judgment.

As more companies adopt AI, different departments may use it in various ways, which could lead to problems. Lisa Targonski recommended forming an AI council to create a consistent approach across the organization.

Kurien Jacob compared AI to refining fuel: just as oil needs to be processed to make fuel, data must be cleaned and verified before being used by AI. If the data isn’t accurate, the AI won’t work well.

On the productivity side, Jacob mentioned that AI can save time on daily tasks, allowing employees to focus more on creative and strategic work. Arlene Ramirez advised leaders to carefully choose AI tools that best fit their team’s needs, rather than trying to adopt every new technology.

AI Poised to Revolutionize Hotel Revenue Management

Wed, 14 Aug 2024 15:28:15 GMT

Hotel companies are increasingly betting on artificial intelligence (AI) to enhance their room pricing strategies, a practice known as revenue management. This field, which relies heavily on forecasting, is primed for a significant overhaul through AI-driven innovation.

Although these advancements won't occur overnight, the industry is optimistic about the potential efficiency gains as software developers address current concerns surrounding the security and reliability of generative AI. Experts anticipate that within a few years, these hurdles will be overcome, enabling hotels to refine their pricing strategies with greater precision.

"While many AI applications seem to address problems that don't truly exist, revenue management is a perfect fit," says Jeff Edwards, a consultant and former IHG executive. Given the complexity and data-heavy nature of revenue management, AI has the potential to outperform human capabilities in real-time decision-making.

Building Confidence in AI Recommendations

One of the key challenges for AI in hotel pricing is establishing trust with decision-makers. Currently, revenue management systems often produce complex data outputs that require interpretation by human managers. This leads to skepticism, particularly when automated rate recommendations are made as booking dates approach.

AI could bridge this gap by offering more transparent insights through interactive chat interfaces, allowing managers to ask questions and understand the rationale behind specific rate suggestions. This enhanced clarity could build greater confidence in AI-driven recommendations, as highlighted by Darren Koch, Chief Product Officer at Duetto.

The Future of Pricing: Dynamic Room Rates and Social Media Insights

Generative AI has the potential to transform how hotels price individual rooms by tapping into unstructured data sources, such as social media. For instance, a hotel room that frequently appears in traveler posts could be dynamically priced higher due to its perceived popularity.

Ryan King of Shiji Americas points out that AI’s ability to process and analyze vast amounts of data could reveal new patterns in travel demand, leading to more nuanced pricing strategies. This shift from broad room rates to highly targeted pricing based on unique room attributes could become the new norm.

Beyond Room Rates: Enhancing Ancillary Revenue with AI

AI’s impact could extend beyond room pricing, improving the management of ancillary revenues like dining and additional services. By analyzing guest behavior and loyalty status, AI could help tailor rates and offers more precisely, driving overall revenue growth instead of just increasing room rates.

Redefining Guest Acquisition and the Role of AI

AI’s integration into revenue management might also reshape how hotels attract guests. As chat-based search using large-language models begins to replace traditional search engines, a new concept—Generative AI Optimization (GAIO)—could emerge as the next evolution of search engine optimization.

While broad adoption of AI in revenue management may take time, early indicators are promising. Companies like Cloudbeds are already leveraging generative AI tools to boost productivity, and industry leaders predict that those who unify their data and embrace AI will gain a competitive advantage.

Nevertheless, challenges persist, particularly in ensuring the accuracy and security of AI systems. As Brian Kirkland, CIO at Choice Hotels, notes, resolving these issues is crucial before AI can be fully integrated into commercial operations.

As AI continues to advance, its role in revenue management could be game-changing, driving a shift toward data-driven decision-making and reducing reliance on traditional methods. Hotel companies that successfully adopt and implement this technology stand to gain a significant edge over their competitors.

U.S. Hotel Industry Overview 2024

Wed, 07 Aug 2024 12:36:52 GMT

ECONOMY:

2024 GDP Growth Forecast Revised Upward

Despite a disappointing Q1, CBRE has raised the 2024 GDP growth forecast to 2.4% from 2.3%, driven by anticipated strong performance in Q2, now expected to reach 2.6% instead of the previously forecasted 0.9%. Inflation is projected to ease slightly, ending the year at 3.0%, down from the earlier estimate of 3.1%.

Consumer Risks Persist as Wage and Employment Growth Slow

Employment growth decelerated to 0.2%, while wage growth held steady at around 4%, about 80 basis points higher than inflation. Consumer leverage remains just below pre-pandemic levels, both in real and nominal terms, but is on the rise. Personal savings continue to lag behind the average.

Decline in CMBS Borrowing Rates

CMBS borrowing rates dropped to 7.4% for the first time in three months due to a 97 basis point year-over-year contraction in credit spreads. CMBS loan issuance surged from $0.6 billion in May 2023 to $1.8 billion in May 2024. The average loan size more than doubled from $20.4 million to $55.2 million year-over-year.

CURRENT TRENDS:

Strong RevPAR Growth in May

May saw the strongest RevPAR growth since May 2023, with a 3.3% increase driven by a 2.4% rise in ADR and a 0.9% increase in occupancy, notably in NYC and Vegas, and timing shifts in SFO conventions. All location types posted positive RevPAR for the first time in nine months.

Majority of Markets Experience RevPAR Expansion

In May, three-quarters of the 65 Hotel Horizons markets posted RevPAR growth, with only 26% experiencing a decline. This is the highest percentage of markets with positive growth since at least January 2024.

Revenue Growth Adjusted for Easter

Total revenues grew by 1.4% combined in March and April. However, an 80 basis point contraction in GOP margins led to a 0.8% decrease in profit dollars. Increases in insurance and property taxes present further challenges to EBITDA growth.

FOOD FOR THOUGHT:

Growth in Short-term Rentals Demand

In May, demand for short-term rentals grew by 13%, outpacing the 1.5% increase in hotel demand. Although RevPAR for short-term rentals grew by 4.2%, occupancy fell below pre-pandemic levels due to continued supply growth.

Inbound International Travel Nearing Pre-pandemic Levels

Outbound international travel in May reached 118% of 2019 levels, while inbound travel hovered at 86%. Travel from Japan and China has stabilized around 50% since August 2023. Both East and West Coast travel trends remained steady in May, with strong summer travel to Europe anticipated.

Increase in TSA Throughput

TSA throughput rose by 6.3% year-over-year in June, reaching 107% of 2019 levels, consistent with May's performance. This increase was reflected in Airport hotel RevPAR, which grew by 4.4% in May, marking the second consecutive month of growth for Airport locations.

Challenges and Trends in California Hotel Development: A Mid-Year Analysis

Tue, 30 Jul 2024 21:15:26 GMT

In the first half of the year, 22 hotels opened in California, which is a slight increase from the previous year's 20. However, the number of rooms in these new hotels saw a significant decrease of 14.75% year-over-year.

The number of hotels under construction remained just over 120, but the total rooms under construction decreased by nearly 1,000. This reflects broader challenges in hotel development, particularly with financing and other economic factors. A notable trend observed by Dan Hayward from The Hotel Investments Team is the rise in abandoned or deferred projects, as well as an increase in projects that have halted construction mid-way, especially in areas like the Coachella Valley, Los Angeles, and Northern California.

Hayward also highlighted specific instances of foreclosure, such as the Hotel Indigo project in Coachella, which remains vacant, whereas Hall Financial managed to continue construction on a foreclosed project in Palm Springs. This discrepancy is due to Hall Financial's unique position as a private lender, which contrasts with other financial institutions that typically sell off unfinished projects rather than completing them.

High interest rates and rising costs of construction, materials, insurance, and financing are major factors contributing to the difficulty of new hotel developments.

Developers are struggling to secure favorable financing terms, leading to a significant reliance on expensive private loans. The uncertain economic environment is causing a lot of capital to remain idle, with investors waiting for better opportunities or pricing resets on foreclosed hotels.

Corporate Travel Trends and Challenges in 2024

Wed, 24 Jul 2024 17:39:10 GMT

According to Knowland and Amadeus, corporate groups, including those attending conferences or conventions, are significantly driving meetings and events volume across the U.S. Group business has fully recovered in 20 U.S. markets.

A report by Deloitte highlights that frequent travelers are increasingly hitting the road for in-person client visits, with one in five reporting monthly or more frequent travel for client work or relationship building.

Crowley believes these in-person interactions enhance traveler satisfaction, noting, “There’s a purpose, a real return on the travel investment,” compared to pre-pandemic travel, which included more trips for meetings now often conducted virtually.

2024 Challenges:

Despite these positive trends, corporate travelers face several challenges.

High prices are affecting business travel plans, with Deloitte finding that pricing's impact on travel volume is 1.5 times more significant than budget cuts. While U.S. lodging costs began to ease in June, they remain significantly higher than pre-pandemic levels, according to the U.S. Travel Association’s Travel Price Index.

Corporate travel planners are also grappling with ambitious sustainability goals. Travelers and planners are increasingly considering emissions when planning trips, though adoption is inconsistent, as companies often encourage rather than mandate sustainability practices. Crowley states, “I think there’s still work to do for companies to try and get a higher adoption rate by their employees from a sustainability perspective.”

A June 2023 Survey by the Global Business Travel Association Revealed that 92% of business travel professionals consider sustainability a "priority."

Simplifying Business Travel with Marriott's New Digital Tools

Wed, 17 Jul 2024 15:02:21 GMT

Marriott International has recently introduced a suite of digital tools aimed at streamlining the planning and booking process for business travelers. These innovations, part of the new Business Access by Marriott Bonvoy platform, are designed to address the common pain points experienced by corporate travelers and travel managers.

**Business Access by Marriott Bonvoy: A One-Stop Shop**

The new platform promises to be a comprehensive travel management solution for small to medium-sized businesses. By integrating various services into a single, user-friendly interface, Marriott aims to simplify everything from booking flights and hotels to managing expenses and generating travel reports. The goal is to make the travel process more efficient and less stressful for business travelers.

**Key Features of the Platform**

1. Custom Travel Policies: Businesses can create and enforce custom travel policies, ensuring compliance and optimizing travel budgets. This feature allows for greater control and oversight of travel expenditures.

2. Discounted Rates: The platform offers access to exclusive discounted rates on hotels, flights, car rentals, and rail travel. This can result in significant savings for companies that frequently send employees on business trips.

3. Comprehensive Insights: Travel managers can access detailed insights and reports on travel spend and patterns. This data-driven approach helps in making informed decisions and improving overall travel strategy.

4. Seamless Booking Experience: The integrated booking tool is designed to be intuitive and easy to use, reducing the time and effort required to organize business trips. Users can book all necessary travel components in one place, simplifying the process significantly.

**Addressing Common Travel Frustrations**

A recent survey conducted by Marriott Bonvoy highlighted that 75% of business travelers are frustrated with their current travel booking platforms. Issues such as lack of transparency, cumbersome booking processes, and limited flexibility were commonly cited. Marriott’s new digital tools aim to tackle these problems head-on, providing a smoother and more efficient travel planning experience.

**Looking Ahead**

With Business Access by Marriott Bonvoy, Marriott International is positioning itself as a leader in the business travel sector. By leveraging technology to improve the travel experience, Marriott not only enhances customer satisfaction but also strengthens its relationship with corporate clients. As business travel continues to evolve, Marriott’s innovative approach is likely to set new standards in the industry.

Evaluating Hotel Investments: Key Insights and Market Trends from Leading U.S. Cities

Tue, 09 Jul 2024 15:05:18 GMT

When reviewing potential hotel deals, the market's current conditions and trends are crucial in deciding whether to invest. Investors look beyond location to evaluate potential risks, including financing rates, regulatory hurdles, and political issues, which can impact profitability.

During a recent Lodging Industry Investment Council meeting, hotel executives shared their insights on several major U.S. hotel markets, discussing what makes them appealing or risky.

San Francisco:

Guy Maisnik, a partner and vice chair of the global hospitality group at Jeffer Mangels Butler & Mitchell, mentioned that some private equity clients are considering investments in San Francisco. They believe the market has bottomed out and is pricing properties based on current numbers. Despite regulatory challenges, labor issues, and crime, these investors see these factors as barriers that could create future opportunities. They are not just looking at hotels but also other asset classes that can be converted into hotels.

New York City:

Mike Cahill, founder and CEO of Hospitality Real Estate Counselors, noted that New York City has recently become a highly desirable market for hoteliers. Boston topped the list, but New York City's appeal is driven by its "cool factor" and attractiveness to young professionals. Even with its issues, New York seems less intimidating to investors than cities like San Francisco or Los Angeles. Cahill suggested that the difference might lie in how each city handles municipal risks.

Los Angeles:

Charles Oswald, CEO of Aperture Hotels, pointed out that Los Angeles has a more hostile union environment compared to San Francisco. Frequent strikes disrupt operations and make it challenging for guests. The city's prolonged approval process for new projects, often taking four to seven years, adds another layer of difficulty. Despite attempts to streamline approvals, various interest groups still create significant delays.

Comparative Politics and Investment:

The political landscape plays a significant role in investment decisions. Maisnik highlighted that New York has not faced the same extreme political measures as California, such as ballot measures requiring hotels to house the unhoused. This political stability makes New York more attractive to investors. Meanwhile, San Francisco's tech companies are beginning to take a more active role in local politics, contributing to safety and security efforts, which might improve the city's investment outlook in the coming years.

Conclusion:

Investors must weigh numerous factors, including market conditions, regulatory environments, and political climates, when considering hotel investments. The insights from the Lodging Industry Investment Council emphasize the complexities and opportunities in key U.S. hotel markets, guiding investors in their decision-making processes.

Park Hotels & Resorts Closes Third Bay Area Hotel

Thu, 04 Jul 2024 14:28:28 GMT

Hilton Oakland Airport to Shut Down Permanently in August

Overview:

The Hilton Oakland Airport, located in Oakland, California, will permanently close its doors on August 28, according to a Hilton spokesperson. This 360-room property is owned by Park Hotels & Resorts, which last year stopped loan payments on two other Bay Area hotels: the Hilton San Francisco Union Square and Parc 55 San Francisco.

Details:

During the latest earnings call, Tom Baltimore, Chairman and CEO of Park Hotels, described San Francisco as a “challenging market.” He noted that exiting the two downtown hotels last year significantly improved the company’s financial health and operational metrics. Despite Park Hotels declining to comment on the Oakland closure, a Hilton spokesperson stated that the decision was made by the hotel's ownership. The company is currently assisting its team members in finding potential transfer opportunities within Hilton.

Financial Impact:

Baltimore highlighted that the decision to leave behind the San Francisco properties allowed Park to return $630 million of capital to its shareholders. The company had previously cited the difficult market conditions in San Francisco, including high office vacancy rates, slow recovery of international travel, safety concerns, and a decline in convention business.

Market Context:

According to a market report by Marcus & Millichap, the San Francisco hospitality sector is facing numerous challenges. In 2023, hotel purchase activity in California dropped by 56.3%, with Northern California experiencing a 48.3% decline in hotel acquisitions by dollar amount. Despite these setbacks, Accor plans to open the first U.S. hotel in its Handwritten Collection in San Francisco this summer.

Marriott and Starbucks Partner to Enhance Loyalty Programs

Mon, 24 Jun 2024 16:50:31 GMT

Exciting News for Marriott Bonvoy and Starbucks Rewards Members

Marriott Bonvoy and Starbucks have announced a new partnership that brings added benefits to their loyalty members. This collaboration allows members to link their accounts and earn points that can be redeemed for both hotel stays and free coffee, expanding the perks available to Marriott's 203 million members.

Key Highlights:

Enhanced Loyalty Benefits: Marriott Bonvoy and Starbucks Rewards members in the U.S. can now link their loyalty accounts. This integration enables members to earn Starbucks stars towards free beverages and other rewards, as well as Marriott Bonvoy points applicable across Marriott’s 30-plus brands and experiences.

Record Membership Engagement: As of March, Marriott Bonvoy boasts 203 million members, with record-high member participation in global room nights, as noted by CEO Anthony Capuano during the Q1 earnings call.

Exciting Opportunities for Linked Accounts:

Double Points: Members with linked accounts can earn double Starbucks stars at Starbucks locations during their stay at Marriott Bonvoy-participating hotels.

Marriott Bonvoy Weeks: Throughout the year, during Marriott Bonvoy Weeks, members can earn 100 Bonvoy points by making three purchases at participating Starbucks locations. The first of these special weeks kicks off on July 8.

Exclusive Experiences: Later this year, members can look forward to unique coffee- and travel-themed experiences on Marriott Bonvoy Moments. This platform has previously offered exclusive events such as a Taylor Swift-themed experience.

Sweepstakes and Prizes: Linked account holders can enter sweepstakes to win a variety of prizes, including the grand prize of a trip to one of the Starbucks Reserve Roasteries in Seattle, Milan, or Tokyo.

Special Cocktails: Starbucks Reserve Locations in Seattle, Chicago, and New York will introduce a new cocktail, the Starbucks Reserve Siciliano for Marriott Bonvoy, available exclusively to loyalty members.

Building on Success:

This partnership with Starbucks follows Marriott’s recent launch of the MGM Collection with Marriott Bonvoy, which has already exceeded expectations according to MGM Resorts International CEO Bill Hornbuckle. Additionally, Marriott promoted its loyalty program with a March Madness-themed marketing campaign earlier this spring.

Marriott’s collaboration with Starbucks is a strategic move to offer more value and exclusive experiences to its members, strengthening its position as a leader in the hospitality industry.

Hilton's Spark: A Success Story Amidst the Pandemic

Tue, 18 Jun 2024 14:54:06 GMT

The pandemic has been a challenging time for many businesses, with hotels being hit particularly hard. During the initial years of the pandemic, hotels nationwide saw an 85% drop in gross operating profit and a 103% decline in net operating income, leading to estimated value declines of up to 35%. While many operators chose to scale back operations in response to these difficulties, Hilton identified an opportunity to attract a new customer base.

“If you look at Hilton's history and its footprint, it’s a company that’s backbone is designed on new-build hotels,” said Alissa Klees, brand leader of Spark by Hilton. “We saw an opportunity to create a conversion brand that’s built for speed and consistency and to serve value-minded travelers who are looking to spend their dollars a little differently.”

With this vision, Hilton introduced Spark, a conversion-only hotel brand. Spark transforms existing hotels into budget-friendly spaces with consistent design, comfort, and quality across various locations. Often, these hotels are nearing the end of their franchise agreements with Hilton's competitors, providing an opportunity to integrate them into the Hilton brand.

“From an investment perspective, this is a great opportunity for owners to upcycle an existing building, breathe fresh new life into it, and give them a new way to invest in the Hilton system from a franchisee perspective,” Klees said. Since its first launch in September 2023, Spark has opened 31 additional hotels nationwide, with plans to reach 100 locations by the end of the year.

Hilton's approach with Spark involved a thorough understanding of architecture and design, recognizing that a one-size-fits-all model was impractical for renovations. By spending 120 nights in conversion candidates and surveying guests, Hilton identified and addressed inconsistencies across hotel experiences.

“We found that this particular space is riddled with inconsistencies,” Klees said. “Travelers felt that they weren’t getting value for their dollar because they may have had an exceptional stay at a hotel in Charlotte, North Carolina, and then a very different experience when they stayed at the same brand of hotel in Elmhurst, Illinois.”

Spark ensures a consistent, high-quality stay at all its locations, setting it apart from competitors. While the exteriors of the hotels might differ, the core guest experience remains uniform.

Converting existing hotels into Spark properties is not only faster to market but also more sustainable. Renovation projects generally require fewer materials and generate less waste than new constructions, aligning with Hilton's commitment to reducing waste and promoting meaningful travel.

A typical Spark hotel features 85 to 100 rooms, with initial focus on suburban areas. However, Hilton is also targeting urban locations such as Chicago, New York, and international markets. The brand recently expanded into the Europe, Middle East, and Africa region with the opening of Spark by Hilton London Romford and plans further global expansion, including locations in Brazil and Mexico.

Hilton has seen immense interest from hotel owners, driven by the potential to join the Hilton system and benefit from its premium offerings. The streamlined conversion process has facilitated this rapid growth.

“Owners see this as an opportunity to get into the Hilton system to get the premiums that Hilton can produce out of their assets,” Klees said. “That desire is creating the appetite to speed through the conversion process, and we've created a streamlined way to do that.”

Owners have expressed excitement about the quick renovations and positive results. One owner, who had his hotel for 25 years and converted it to a Spark three months ago, recently experienced his most profitable day and first sold-out night in 25 years.

“Stories like that drive us and make us feel proud about what we've done and confident that the future is bright for this brand,” Klees said.

Navigating the Challenges of 2024: Strategies for Hoteliers Amidst Rising Costs and Shifting Demand

Wed, 12 Jun 2024 15:25:55 GMT

As demand grows in the higher-end hotel sector and softens at the lower end, hoteliers are facing increased costs for the remainder of 2024.

During the "Data Insights" session at the 2024 NYU International Hospitality Industry Investment Conference, STR President Amanda Hite noted the widening gap between upscale and lower-tier hotels, partly due to persistent high inflation. "We see a clear divide between upper-tier chain scales and lower tier," she said. "Upper-tier segments, from upscale to luxury, have seen a 2.1% demand growth and a 1.8% increase in revenue per available room (RevPAR) in the first four months of the year. In contrast, lower-tier segments experienced a 2.5% decline in demand and a 2.4% drop in RevPAR." Hite anticipates these trends to continue for the rest of the year.

Rod Clough, president of HVS Americas, emphasized the importance of focusing on the bottom line. He stressed that operational quality is crucial, even for lower-end hotels, which can thrive with a good general manager. "It's time to focus on the current market conditions and stop expecting a return to pre-pandemic norms," he said. "The market is what it is today, and we shouldn't expect any monumental shifts."

Ben Harrell, managing director of the U.S. for Booking.com, highlighted a unique opportunity for hotels as booking windows for short-term rentals shorten and lengthen for hotels. "New types of bookers are showing interest in your properties," he said. "This shift in booking patterns can lead to significant changes.".

Michael Grove, CEO of HotStats, pointed out that cost increases are not limited to labor but are broad-based. European hoteliers have already adapted to higher energy costs, and American hotels need to adopt similar efficiency measures. "In the U.S., with significant revenue gains, now is the time to focus on operational efficiency," he said.

In the long term, Clough advised hotel investors to prioritize revenue-driving amenities, such as wellness facilities and gyms, over pools. "How often do you see full treadmills and empty pools?" he asked.

Hite echoed the need for thoughtful operations, noting that increasing rates may not be enough to offset rising costs. "I'm concerned about margin pressures," she said. "Our RevPAR gains rely on rate growth, which isn't keeping up with inflation. It's going to be challenging."

More Hoteliers Expected to Sell Rather Than Refinance as Loan Maturities Approach

Tue, 04 Jun 2024 18:45:32 GMT

Hotel owners are facing significant financial challenges due to high interest rates, rising insurance costs, and other economic pressures. These issues will likely compel many owners to consider selling their properties to repay debt coming due by the end of 2024. A substantial amount of U.S. hotel debt is maturing, and in a high-interest-rate environment, refinancing options may be limited.

According to a recent report by commercial real estate company JLL titled “Impending U.S. Hotel Debt Maturities and Implications for Transactions,” approximately $5.8 billion in U.S. hotel securitized loans will require repayment later this year. Owners will need to either fully repay, refinance, extend, or sell their properties. The current financial climate, characterized by high interest rates and rising insurance costs, makes refinancing particularly challenging, pushing many owners toward transactions.

JLL's report analyzes the financial stress hotel owners are expected to face as their loan maturity dates approach. It also evaluates the most advantageous repayment strategies.

**High Interest Rates**

JLL reports that around 71.4% of the maturing loans are in "critical stress," meaning they cannot generate enough net operating income to meet their debt obligations. Persistently high interest rates are a major contributor to this financial strain.

Since 2020, average fixed interest rates for U.S. hotel securitized loans have risen by 332 basis points, reaching 7.7% in the first quarter of 2024. With the U.S. Federal Reserve maintaining restrictive rates, interest rates are expected to stay elevated, making refinancing an unattractive option for many borrowers.

The high-interest environment has also hindered hotel construction financing, causing developers to delay projects or consider hotel conversions as alternatives to new construction. Additionally, hotel profitability has been lagging, despite a 13.2% increase in U.S. hotel RevPAR in 2023 compared to 2019 levels, driven by strong domestic leisure demand. Markets reliant on international, business, and group travel have seen slower profitability recovery.

In top gateway markets, gross operating profit per available room is about 20% lower than 2019 levels. These markets face high labor costs, increasing property taxes, and other operational expenses, making it difficult for hotel owners to extend loan maturities through refinancing. Rising insurance costs further disrupt cash flows and elevate credit risk.

In 2023, property insurance costs in New Orleans surged by 131% compared to 2021, the highest increase among the top 25 U.S. markets. Other major markets like Miami, Los Angeles, Chicago, New York, and Boston also experienced double-digit increases in insurance costs. These rising expenses directly impact hotels' cash flows, making it harder to meet debt service obligations.

For hotels in "critical stress," refinancing upon loan maturation may not be viable. Instead, owners are expected to pursue transactions as a strong exit strategy, leading to increased hotel transaction volume through the rest of 2024. This presents a "near-term window of opportunity" for hotel investors to capitalize on market dislocation, but this window is expected to close as the number of critically stressed loans decreases from 145 in 2024 to nine by 2028.

Summer Travel 2024: Evolving Trends and Changing Preferences

Wed, 29 May 2024 16:35:25 GMT

As Americans prepare for summer travel, demographics, budgets, and travel motivations are shifting, with many opting for alternative lodging options. While the surge of post-pandemic "revenge travel" may have peaked, summer travel remains robust.

Mike Daher, who leads Deloitte’s travel and hospitality sectors and co-authored the Deloitte 2024 Summer Travel Report, told Hotel Dive, “This will be a busy summer. Nearly half of Americans are planning to take a trip this summer — a slight decrease from last summer, but still a significant number.” AAA predicts that 44 million Americans will travel for Memorial Day alone, and projections indicate a 4.1% year-on-year increase in RevPAR, according to Sachin Avadhani, EY Americas’ hospitality sector leader, and Michael Selinger, EY’s senior manager of strategy and transaction.

Travelers this summer will have diverse demographics, budgets, and reasons for travel, with an increasing preference for alternative lodging options like camps and RVs. To stay competitive, hoteliers must adapt to shifting traveler desires and offer unique, memorable experiences. Leisure travel will be popular across all generations, with Lindsay Roeschke, a travel and hospitality analyst at Morning Consult, highlighting Gen Z as a “rising force.”

"The primary driver for all generations in travel will be to relax and escape daily responsibilities,” Roeschke said. However, travel preferences will vary by generation. Gen Z travelers are more deal-focused, millennials will use credit card miles for international travel, Generation X will plan more solo trips or travel with friends, and baby boomers will travel with extended families. Daher noted that baby boomers, in particular, will vacation extensively, accounting for 34% of travelers this summer, up from 28% last year. Budget is a significant determinant of travel plans this year. With rising travel costs, a higher percentage of travelers will come from higher income brackets. Deloitte reports that 44% of this year’s summer travelers earn over $100,000 annually, compared to 35% last summer. Some travelers are increasing their budgets to accommodate higher costs, while others are opting out of travel due to perceived expenses.

Morning Consult’s Summer 2024 Travel Demand Outlook found that consumers are more likely to avoid expensive hotels rather than downgrade to cheaper alternatives. Demand for high-end experiences is expected to boost performance in the premium segment, though competitive pricing and ADR pressures present challenges, according to EY’s Avadhani and Selinger.Summer 2024 will see greater demand for experiences and adventures, with travelers seeking meaningful engagement and self-discovery. This trend has led to arise in solo travel and travel services catering to spontaneity and cultural authenticity.Alternative lodging is on the rise, with 63% of travelers planning to stay at hotels this summer, down 10% from last year, according to Deloitte. Interest in private rentals, bed and breakfasts, RVs, and camping is increasing as travelers seek meaningful experiences. Daher highlighted a trend toward RV travel across all income brackets, with resort brands catering to this demand. For instance, a $2 billion theme park in Oklahoma will feature a hotel and a 320-acre RV park, and Margaritaville is expanding its Camp Margaritaville RV park brand with millennials in mind.

Experiential travel is also driving a boom in sports tourism. Hotels are capitalizing on events like the Summer Olympics in Paris, with U.S. hotels offering sports-related experiences. Wyndham Hotels & Resorts now allows loyalty program members to exchange points for Minor League Baseball tickets, and Marriott Bonvoy has partnered with the U.S. Soccer Federation for exclusive fan experiences. The U.S. co-hosting the ICC Men’s T20

World Cup next month is expected to boost international tourism, particularly in New York, Florida, and Texas. To stand out this summer, Daher advises hoteliers to create unique and differentiated experiences. This could include educating travelers about their destinations or surprising them with unexpected experiences.

Despite the strong U.S. dollar, which may encourage Americans to travel abroad, the U.S. hotel industry can harness travel trends while safeguarding against potential risks by balancing luxury growth opportunities with competitive and economic challenges.

Generative AI-based technologies have not yet significantly impacted the industry, although interest remains. Deloitte predicts the rise of “Gen AI agents” that will optimize travel bookings, pricing, loyalty memberships, and more in the future.

CBRE Forecasts RevPAR Growth in Second Half of 2024 Despite Initial Setback

Wed, 22 May 2024 16:29:45 GMT

CBRE forecasts an uptick in U.S. RevPAR (Revenue Per Available Room) growth in the second half of 2024 despite a weaker-than-expected first quarter. After a 2.1% decline in Q1, partly due to the Easter holiday affecting business travel, CBRE now anticipates a 3% growth for the year, up from an earlier 2% forecast. Factors contributing to this positive outlook include an increase in international tourists, election-related events, and muted supply growth in the hotel industry.

However, challenges such as softer demand, persistent inflation, and high interest rates may impact travel. The report also highlights that economic factors like GDP growth, projected at 2.3%, have a strong correlation with RevPAR growth. CBRE expects that elevated construction and financing costs will keep new hotel supply growth below 1%.

Additionally, the Republican National Convention in Milwaukee is already boosting local hotel occupancy rates. This forecast aligns with STR's January prediction that strong travel fundamentals and increased group business demand will support hotel performance throughout 2024.

Extended Stay Hotels: Resilient Growth and Investment Opportunities

Wed, 15 May 2024 01:03:44 GMT

Hospitality experts forecast significant growth and investment in the extended stay hotel sector this year, pinpointing key markets and prominent brands driving the segment. Despite economic challenges such as high interest rates and staffing shortages, the extended stay hotel model is thriving, buoyed by brand launches, development deals, and nationwide investment activity.

Demand for extended stay accommodations remains strong, appealing to trades workers, business travelers, and college students. These hotels stand out due to their operational efficiencies, high revenue margins, and expanding guest base, making them a favorable choice for investors and developers.

Industry professionals provided insights into the future of this booming segment, highlighting important markets and brands to watch this year. Extended stay hotels accounted for a significant share of the U.S. hotel construction pipeline in Q1, attracting investors with their lower risk, quicker cash flow, and strong revenue streams.

Ned Washburn from RREAF Holdings underscores the appeal of extended stay hotels, noting their rapid construction and operational efficiency. These hotels typically require fewer full-time employees and offer high profit margins, making them a profitable investment.

The demand is driven by business travelers, digital nomads, and construction workers, with the Biden administration's infrastructure projects further fueling this segment. College students and traveling professors also find extended stay hotels to be an affordable housing option.

Top markets for extended stay development are expected to be college towns and areas with significant medical, manufacturing, or logistics facilities, particularly in the Sun Belt and southeastern states. Real estate firms like Rimrock Companies and Noble Investment Group are actively developing extended stay properties in these regions.

Hotel companies are expanding their extended stay portfolios, with brands like Extended Stay America, Hilton’s LivSmart Studios, Hyatt Studios, Wyndham’s Echo Suites, and Marriott’s StudioRes leading the segment. Newer brands such as LivAway Suites and Echo Suites are also experiencing rapid growth, with substantial expansion plans underway.

In conclusion, the extended stay hotel model is flourishing, offering numerous advantages over traditional short-stay hotels and attracting a diverse guest base. This makes the segment a promising area for ongoing development and investment.

Blending Boundaries: How the Hotel Industry's Evolution Is Shaping New Growth Horizons

Wed, 08 May 2024 14:58:10 GMT

The hotel industry is undergoing a significant transformation as it matures, marked by slowed unit growth, increased costs, and intensified competition for guests. This evolution is prompting hotels to find innovative ways to increase returns on investment, chiefly by driving higher same-store sales. To achieve this, hotels are expanding their services to not only retain existing customers but also to attract new demographics beyond the typical business and leisure travelers. This strategy involves forming partnerships with companies in different sectors, such as residential real estate, to offer diverse living options like co-living spaces, student housing, and senior communities, thus enhancing guest trust and flexibility.

Over the years, the hotel industry has benefitted from the scale and capital of global conglomerates, leading to a segmentation of brands and specialized growth in hotel branding, real estate ownership, and operations. However, as the industry faces the challenges of a saturated market and high customer acquisition costs, there's a strategic pivot towards international expansion, acquiring new brands, and forging strategic alliances. These partnerships, previously confined to closely related industries like airlines and car rentals, are now extending to sectors like food

delivery and health clubs, aiming to broaden the hotel's Total Addressable Market (TAM) and engage customers more comprehensively throughout their lives.

The integration of the hotel industry with other sectors is becoming increasingly prevalent, with traditional hotel companies venturing into markets like short-term rental management and branded residential developments. This convergence is driven by the need to create more integrated and amenity-rich living experiences that cater to various life stages and preferences. For instance, companies like Marriott are exploring opportunities in student housing and senior living, aiming to capture customer loyalty from an early age and maintain it into later life stages. These initiatives reflect a broader trend where hotel brands leverage their reputation and operational expertise to diversify offerings and tap into new revenue streams.

The shift towards a more integrated and diverse hospitality sector suggests a future where hotel brands could play a pivotal role in the broader lifestyle and residential markets. By merging traditional hospitality with other living and community formats, hotels can enhance their value proposition and customer engagement, ensuring sustained growth in an increasingly competitive landscape. This strategic convergence not only promises to expand the customer base but also to fortify the industry's ability to adapt to changing consumer demands and economic conditions,

ultimately enhancing the longevity and profitability of hotel brands in the global market.

Hotel Employees Unionizing? Is this a Good Idea?

Tue, 30 Apr 2024 16:16:07 GMT

Several hotels in Southern California have successfully negotiated new four-year contracts with union workers, as reported by hospitality union Unite Here Local 11. These recent agreements involve seven hotels including the Grand Prix of Long Beach, Hotel Maya Long Beach, Hyatt Place Pasadena, Proper Santa Monica, Proper Downtown Los Angeles, Westdrift Manhattan Beach, Hotel June West LA, and Alsace Hotel. This development brings the total to 41 hotels that have settled their contracts amidst ongoing strikes in the region.

Despite these settlements, disputes continue at other properties, particularly those managed by Aimbridge Hospitality, where workers have continued to strike, including events as recent as this month. The newly negotiated contracts offer substantial benefits to workers, including an immediate $5 per hour raise in the first year, and a 40% to 50% wage increase for non-tipped workers over the term of the agreement. The agreements also restore pre-pandemic staffing levels and mandate daily room cleaning.

Additional contract provisions include access to one of the nation's highest-paid pension plans for service workers and new clauses addressing fair treatment for workers affected by issues in the criminal justice system and immigration. By 2027, room attendants under these contracts are projected to earn $35 per hour.

The recent strike at Hotel Maya highlighted the intense challenges faced by workers, including violence on the picket lines. Camila Delgado, a housekeeper at Hotel Maya, highlighted the resilience of the workers, stating, "We are proud that we never gave up, and we look forward to having the same standard raising benefits and protections other hotel workers now enjoy."

Strikes continue at other Southern California locations, spurred by various grievances including allegations of sexual harassment at an Aimbridge-operated hotel. The struggle has garnered significant attention, with Sen. Bernie Sanders recently showing support by joining a picket line. Unite Here has been coordinating these strikes since last July, marking the largest hospitality industry strike in U.S. history with more than 10,000 workers from 52 hotels participating in 170 strikes. Further actions are expected as the union continues its efforts to secure better conditions for hospitality workers across the region.

Guest Satisfaction in Hotels Returns to Pre-Pandemic Levels

Thu, 25 Apr 2024 16:37:32 GMT

Research conducted by the American Customer Satisfaction Index suggests that the travel industry is experiencing a resurgence. The ACSI's Travel Study 2023-2024 indicates that customer satisfaction levels in lodging, online travel agencies, car rentals, and airlines have returned to pre-pandemic levels.

This is particularly uplifting news for lodging providers, as their customer satisfaction scores hit a 15-year low in 2022.

Forrest Morgeson, associate professor of marketing at Michigan State University and director of research emeritus at the ACSI, noted that despite the challenges the lodging industry faced due to staffing issues post-pandemic, it has rebounded remarkably well in terms of customer satisfaction compared to other travel sectors.

The study revealed a 3% increase in customer satisfaction with lodging compared to the previous year, following a 6% increase reported in the previous year's study. Notably, Hilton emerged as a standout performer in this year's report, with Hilton brands like Hampton, Hilton Garden Inn, and Hilton Hotels & Resorts receiving the highest customer satisfaction scores among their peers. Marriott brands like AC Hotels and Marriott Hotels also performed well, with Airbnb ranking sixth, surpassing many traditional hotels.

Business travelers were found to be more critical of their lodging experiences compared to leisure travelers, with 31% expressing dissatisfaction compared to 12%.

The improvements in lodging satisfaction scores are attributed to a return to normal operations, the adoption of technology such as contactless check-in, and enhanced staffing levels. Morgeson emphasized that addressing staffing shortages has played a significant role in enhancing guest satisfaction, with a focus on gradual improvements and incentives for employee retention, such as better wages and benefits.

A J.D. Power study echoed these findings, highlighting the importance of increased hiring in hotels for improved customer satisfaction. Andrea Stokes, hospitality practice lead at J.D. Power, emphasized the crucial role of frontline staff in shaping the guest experience.

Additionally, the ACSI ranked guest satisfaction with online travel agencies, with Booking.com securing the top spot and Expedia following closely behind.

The ACSI Travel Study 2023-2024, based on interviews with 16,352 customers conducted between April 2023 and March 2024, provides valuable insights into the evolving landscape of customer satisfaction in the travel industry.

Is Glamping a New Hotel Strategy

Wed, 17 Apr 2024 15:33:26 GMT

Under Canvas, an outdoor-focused hospitality company, is set to open its first California location, Under Canvas Yosemite, near Yosemite National Park in 2025. This 80-acre camp, just 10 minutes from the park, will offer "safari-inspired" tents with king-size beds, private decks, ensuite bathrooms, daily events, and nightly s’mores. CEO Matt Gaghen expressed that expanding to California has been a goal since the brand started in 2012, recognizing Yosemite as a hub for outdoor enthusiasts.

Under Canvas already operates in various national park locations such as Zion, Bryce Canyon, and Acadia, among others. The Yosemite camp, nestled in a mountainside forest, will provide guests with car-free access to the park through the nearby Yosemite Area Regional Transportation System stop.

The camp's amenities include a "lobby tent" with communal spaces, dining areas featuring California wines and beers, and a mix of indoor and outdoor dining experiences. On-site activities will range from live music to daily yoga, kids’ activities, and adventure bookings with an "Adventure Concierge."

Under Canvas is part of the Small Luxury Hotels of the World network, with Hilton announcing an exclusive partnership in February. Hilton is also venturing into glamping through a partnership with AutoCamp, known for boutique stays near Yosemite and other outdoor destinations. Industry experts anticipate more major hotel brands entering similar partnerships to meet the rising demand for unique outdoor experiences, as highlighted in Hilton's 2024 Trends Report where half of respondents expressed a priority for exploration and adventure this year.

IHG Unveils Innovative Room Prototypes for Staybridge, Candlewood, and Atwell Suites

Tue, 02 Apr 2024 18:07:41 GMT

In a move aimed at enhancing guest experiences and catering to evolving market demands, IHG Hotels & Resorts has introduced new room prototypes for three of its prominent suites brands: Staybridge Suites, Candlewood Suites, and Atwell Suites. The unveiling of these prototypes signifies IHG's commitment to providing developers with greater flexibility in the rapidly growing suites space while maintaining the brand hallmarks cherished by guests.

The new prototypes, announced on Tuesday, are designed to complement existing choices for hotel developers while optimizing spaces for maximum efficiency. They retain popular features such as ample in-room storage, kitchen facilities, and shared food and beverage areas, ensuring continuity in guest experience across different properties.

Kevin Schramm, IHG’s Senior Vice President of Development for mainstream brands in the U.S. and Canada, emphasized the importance of incorporating guest and owner feedback into the design process. He stated, "Our new concepts reflect guest and owner feedback, and enable new and existing owners to deliver our modern suite experiences — in various forms — to more markets without compromising consistency or quality."

The new Staybridge Suites prototype, named "Smart Studio," caters specifically to shorter-stay guests. By utilizing a slimmer room bay and streamlined kitchen equipment, developers can optimize space without sacrificing comfort or functionality. Similarly, the "Beacon 4.2" prototype for Candlewood Suites features a more efficient room bay design, allowing for potential expansion of up to 12 keys on a similarly sized site.

Atwell Suites, a brand IHG is actively expanding, offers two new lobby configurations alongside a redesigned room prototype. With a focus on flexibility and versatility, the updated prototype includes a slimmer room bay and essential amenities such as a wet bar, sofa, and work desk. This design innovation aligns with IHG's commitment to meeting the diverse needs of modern travelers.

IHG aims to make these new prototypes available to owners by the second quarter of this year, with the first properties featuring them expected to open as early as 2025. While initially exclusive to U.S. hotel owners, IHG plans to extend the rollout to Canada, the Caribbean, and Latin America in the near future.

The introduction of these innovative room prototypes comes at a time when the demand for suite accommodations is on the rise. As reported by The Wall Street Journal, travelers increasingly seek the comfort and convenience offered by hotel suites, driven by factors such as hybrid work arrangements and multigenerational travel.IHG's commitment to innovation extends beyond its suites brands, with other hotel chains also introducing refreshed room prototypes in response to changing consumer preferences.

These developments underscore the industry's dedication to enhancing guest experiences and adapting to evolving trends in the hospitality sector.With the debut of these new prototypes, IHG reaffirms its position as a leader in the hospitality industry, committed to delivering exceptional guest experiences while providing hotel developers with the tools and flexibility needed to thrive in a dynamic market landscape.

Navigating the Post-Pandemic Hospitality Landscape: The Pressure of Property Improvement Plans on Hotel Owners

Tue, 26 Mar 2024 16:02:56 GMT

In the wake of the pandemic's disruption to travel, many hotel owners caught a break as brands deferred enforcement of property improvement plans, or PIPs. This meant they could postpone costly upgrades while dealing with reduced occupancy

and financial strain.

Now, with travel picking up again, the leniency seems to be fading. As demand for rooms returns to pre-pandemic levels, hotel brands are turning up the pressure for PIP compliance. These plans often involve revamping traditional amenities like bedding and decor, as well as upgrading technology such as Wi-Fi and check-in systems.

For hotel owners, this means footing the bill for renovations, not just to meet brand standards but also to keep pace with evolving guest expectations. Beyond mere compliance, there's a need to modernize to stay competitive and justify room rates. In essence, maintaining a fresh and appealing property is essential for attracting guests and maximizing revenue.

Thankfully, the rebound in business means many hotels have the financial capacity to fund these improvements. However, delaying renovations could lead to a loss of customers who seek more updated accommodations elsewhere. Thus, reinvesting in the property becomes crucial for sustaining revenue growth.

Determining the necessary investment per room and the timeline for recovering those costs varies widely. Typically, hotels allocate a portion of their revenue for capital improvements, but additional expenses may arise over time. Some owners might struggle to finance these upgrades, facing the tough choice of losing their brand affiliation or selling to better-capitalized investors.

Rising interest rates further complicate matters, potentially reducing property values and limiting owners' options. This puts additional pressure on them to complete PIPs, even if they had planned to sell the property.

Estimating the return on investment for these improvements is challenging due to numerous variables. Ultimately, maintaining brand standards and keeping the property appealing to guests is essential for long-term success in the competitive hospitality industry.

Why College Towns are attractive to Hoteliers

Wed, 20 Mar 2024 03:15:48 GMT

Stability in Demand: College towns, supported by large universities, are considered recession-proof. The economic ups and downs that affect other markets are less impactful here. Lodging demand in these areas is stable, with occupancy percentages and average daily rates showing consistent patterns. This stability makes hotel investment in university towns relatively low risk compared to other markets.

Events and Sporting Activities: School events, especially sporting events, can lead to high Average Daily Rates (ADRs) and full occupancy. This includes not just game days but also events related to the university. This factor contributes to the attractiveness of these markets for hotels.

Growing Market: The demand for upscale accommodations in college towns is growing. This is evident in the expansion of brands like Study Hotels and Scholar Hotel Group into various university towns across the country. Travel + Leisure Co. and Sports Hospitality Ventures are also entering this market with plans for Sports Illustrated Resorts in college towns.

Stable Workforce and Infrastructure: College towns often have a stable workforce population due to the presence of the university. Investments in infrastructure by governments or private entities further support ancillary businesses in these markets, leading to increased demand for accommodations.

Predictable Academic Calendars: The academic calendar provides a predictable pattern for hoteliers to forecast demand and manage revenue strategically. Events like orientation weeks, graduation ceremonies, and alumni weekends are opportunities for increased bookings.

Challenges in College Town Markets:

Seasonal Demand: Demand in college towns can vary seasonally, with some periods slower than others. While football weekends may bring in substantial revenue, hotels need to maintain high occupancy throughout the year to be successful.

University Funding: Hotel demand can be impacted by the financial health of the university. Universities heavily reliant on federal or state funding for programs and infrastructure may affect hotel occupancy rates.

Misconceptions about Peak Times: Contrary to the belief that hotels in college towns rely solely on football weekends for revenue, there is a need for consistent business throughout the year. Major universities attract visitors for various reasons beyond sports events, which can help sustain hotel activity.

Overall, the interest from major hotel brands like Hilton in acquiring brands focused on college towns validates the potential of these markets. The $210 million acquisition of Graduate Hotels demonstrates confidence in the business potential of college town hospitality.

Leading Hotel Executives outline Trends for 2024

Fri, 15 Mar 2024 13:05:58 GMT

The resurgence of group and business travel across key U.S. markets is generating optimism among event planners and hoteliers. After a pandemic-induced hiatus, corporate professionals are returning to offices and resuming conferences, fueling hotel revenues.

This revival comes with notable shifts in traveler preferences, emphasizing unique experiences in group and business trips. Large meetings are making a comeback, especially among smaller companies, with Marriott actively securing future availability.

Notably, Marriott's group revenue in the U.S. saw a 7% increase year-over-year. Cities like Dallas, Atlanta, and New York City are witnessing a resurgence in large group travel, while Las Vegas is expected to drive hotel revenue growth. Travelers now seek experience-driven amenities, leading to demand for nontraditional venues and outdoor spaces. Marriott and other hotels are adapting by offering tailored experiences, such as ocean ceremonies and locally inspired cuisine.

This trend aligns with the rise of "leisure" trips, where business travelers extend stays for leisure. Businesses are selecting hotels based on family-friendly amenities, reflecting a shift towards multifaceted experiences. Overall, as group and business travel rebound, there's a renewed focus on tailored experiences and outdoor venues, marking a significant shift in the meetings and events sector.

Strong Leisure Travel Intent Despite Consumer Spending Worries: Deloitte

Wed, 06 Mar 2024 16:27:59 GMT

Strong Leisure Travel Intent Despite Consumer Spending Worries: Deloitte

Recent data from Deloitte’s ConsumerSignals tracker indicates that concerns about rising prices are affecting Americans’ overall financial well-being. This worry is impacting consumer spending in categories like apparel and electronics, but interest in leisure travel remains strong. Deloitte suggests that consumers’ willingness to spend on travel signals ongoing pent-up demand from the pandemic era. However, consumers may make adjustments to maximize their budgets, such as opting for shorter trips or more affordable accommodations, according to Stephen Rogers, managing director of the Deloitte Consumer Industry Center.

Deloitte’s ConsumerSignals tracker has shown a trend inversely related to headline inflation since 2020, indicating that price increases have influenced consumer sentiment on savings, major purchases, and financial expectations for the upcoming year. Consumer financial well-being plays a significant role in their spending intentions.

In fall 2022, as financial well-being improved, Americans directed their additional funds towards services like restaurants, recreation, entertainment, and leisure travel, as reported by Rogers to Hotel Dive. Despite the normalization of leisure travel demand after the initial post-pandemic surge, there is still pent-up demand evident. A report from the American Hotel & Lodging Association suggests that nearly three-fourths of Americans plan to increase or maintain their number of hotel stays this year.

However, Rogers also notes that travelers may make compromises and get more creative with their spending, such as opting for shorter trips, choosing more budget-friendly destinations, or selecting budget hotels. A January Deloitte report indicates that in 2024, travelers are likely to prioritize spending on experiences over the class of the hotel.

IHG midscale conversion brand, Garner, is expanding globally

Mon, 26 Feb 2024 17:09:00 GMT

IHG midscale conversion brand Garner expands globally

IHG Hotels & Resorts’ mid-scale conversion label, Garner, revealed the inauguration of two fresh venues in the United States alongside ambitious strategies for global growth on Wednesday.

The newest Garner establishments are now operational in Macon, Georgia, and Oklahoma City, with further agreements inked for locations in Topeka, Kansas; Provo, Utah; Brenham, Texas; Mahwah, New Jersey; Dowel, Illinois; Gillette, Wyoming; and Clarksville, Tennessee.

Having been introduced less than a year ago, the brand is rapidly expanding, aiming to unveil over 500 hotels across the U.S. within the next decade. IHG announced on Wednesday that additional franchising opportunities will be open in Mexico and Canada by March, with plans for expansion in other regions already in motion.

Karen Gilbride, IHG’s vice president for Garner, Avid Hotels, and Atwell Suites, attributed the swift pace of Garner's expansion to their adaptable approach towards conversions. "Every time we have an owner who says 'I'm interested,' our team will actually visit that hotel, and they will craft a bespoke property improvement plan," she explained. Some conversion properties could swiftly open due to pre-existing designs, furniture, and amenities aligning with the Garner brand.

Gilbride noted, "What’s been really exciting is that, yes, it’s established owners that are coming to Garner, but it’s also a lot of new owners to IHG." She highlighted that the team behind the inauguration of Garner's first hotel in Auburn, Washington, was new to IHG.

The Garner Hotel Macon Wes, a 63-room establishment, was opened by first-time IHG owner Georgia-based Sapphire 2021 LLC, conveniently situated adjacent to the largest indoor pickleball facility globally. Garner Hotel Oklahoma City – Quail Springs, a 68-room property, is managed by long-standing IHG owner Champion Hotels and is located in close proximity to Quail Springs Mall, Lake Hefner, and Remington Park Racetrack and Casino Area.

Furthermore, Garner announced intentions to extend its presence across IHG’s Europe, Middle East, Asia, and Africa regions. IHG has inked a Letter of Intent with Aze Management Partners to convert three hotels into the Garner brand in Osaka, Japan.

How can hoteliers optimize their loyalty program?

Thu, 15 Feb 2024 17:18:50 GMT

Hoteliers can optimize loyalty programs in several ways to attract and retain customers. Here are four effective strategies:

Personalized Experiences: Tailoring experiences to meet individual preferences can significantly enhance loyalty. Utilizing customer data and insights, hoteliers can personalize offers, recommendations, and services based on past behavior, demographics, and stated preferences. This personal touch makes guests feel valued and understood, fostering a stronger emotional connection to the brand.
Seamless Integration: Integrating loyalty programs across various touchpoints, including online booking platforms, mobile apps, and in-person interactions, ensures a seamless and convenient experience for guests. This approach allows customers to easily earn and redeem rewards, track their progress, and engage with the brand across different channels, enhancing their overall satisfaction and loyalty.
Enhanced Benefits and Rewards: Offering compelling benefits and rewards is crucial for incentivizing repeat business and driving loyalty. Hoteliers can differentiate their loyalty programs by providing exclusive perks such as room upgrades, complimentary amenities, early check-in/out privileges, and access to unique experiences or events. Regularly updating and refreshing rewards ensures continued relevance and excitement for program members.
Engaging Communication: Effective communication is essential for building and maintaining strong relationships with loyalty program members. Hoteliers can engage with customers through personalized messaging, targeted promotions, and relevant content across email, social media, and other communication channels. By keeping members informed about special offers, upcoming events, and loyalty program updates, hoteliers can drive engagement and reinforce brand loyalty. By implementing these strategies, hoteliers can optimize their loyalty programs to attract and retain customers, ultimately driving revenue and fostering long-term success in the competitive hospitality industry.

2024 Hospitality Trends: A Guide for Hoteliers

Tue, 09 Jan 2024 00:55:53 GMT

In 2024, Hoteliers will continually face evolving trends and challenges that impact their operations and strategies. While the specific focus areas can vary based on market trends and global events, here are some of the hot topics that hoteliers might consider in the current year:

Technology Integration: Embracing tech innovations like contactless check-in/check-out, mobile room keys, AI-driven guest services, and enhanced data analytics for personalization and operational efficiency.
Sustainability Initiatives : Implementing eco-friendly practices, reducing waste, energy efficiency, sustainable sourcing, and promoting environmental responsibility as guests increasingly value eco-conscious choices.
Health and Safety Measures: Continuing to prioritize guest and staff safety by maintaining and updating stringent cleanliness protocols, health screenings, and adopting technologies that enhance safety (e.g., air filtration systems).
Adapting to Changing Travel Preferences: Adjusting offerings to accommodate the surge in demand for remote workspaces, staycations, workations, and experiences that cater to shifting travel behaviors and preferences.
Enhanced Guest Experiences: Focusing on personalized experiences, unique amenities, and tailored services to attract and retain guests, emphasizing convenience, comfort, and memorable stays.
Labor Shortages and Employee Well-being: Addressing staffing challenges by offering competitive wages, employee benefits, and prioritizing staff well-being to retain and attract talent in a competitive market.
Revenue Diversification: Exploring alternative revenue streams such as partnerships with local businesses, hosting events, offering unique packages, and leveraging technology for ancillary sales.
Direct Booking Strategies: Implementing strategies to encourage guests to book directly through the hotel's website, offering incentives and loyalty programs to reduce reliance on online travel agencies (OTAs) and boost profitability.
Digital Marketing and Online Presence: Strengthening digital marketing efforts, utilizing social media, user-generated content, and SEO to engage with guests and drive direct bookings.
Regulatory Compliance and Industry Trends: Staying updated with local regulations, industry trends, and geopolitical events that could impact travel, tourism, and hospitality, adapting strategies accordingly.

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Strong Leisure Travel Intent Despite Consumer Spending Worries: Deloitte

Strong Leisure Travel Intent Despite Consumer Spending Worries: Deloitte

IHG midscale conversion brand, Garner, is expanding globally

IHG midscale conversion brand Garner expands globally

How can hoteliers optimize their loyalty program?

2024 Hospitality Trends: A Guide for Hoteliers