SPECIAL REPORT |
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macroeconomic environment ?. Robert Cole , president and CEO , HVMG : We will continue to see a relatively slow pace in terms of hotel transactions . It ’ s been almost 20 years since interest rates have been this high and that , coupled with tightening credit requirements , has led to a relatively wide bid-ask gap between buyers and sellers . Most brokers have expressed their transactions and pipeline are down as much as 40 % in 2023 and there ’ s not much on the near-term horizon that |
Robert Cole
signals a big shift is coming . Sean Hehir , president and CEO , Trinity Investments : Hotels that are over-leveraged will be a big topic as interest rates are expected to remain at higher levels , which will likely lead to increased transaction volume next year . In 2024 , expect to see a lot of forced selling and / or mezzanine debt or preferred equity deals to fill holes in the capital stack as owners who need to refinance get quotes at lower leverage . We thought that this would occur between 2020 and 2022 , but lenders kept extending and pretending . We ’ re starting to see
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these opportunities now . Jack Paul , EVP of operations , 24 / 7 Hotels : Continued pressure on labor costs from increasing wages , taxes and benefits , coupled with the rising costs of goods and services , will outpace projected ADR growth , further diminishing operating margins . The recognition that interest rates will be higher for longer , thereby making it difficult to restructure financing , will further pressure operators to cut services and amenities to maintain positive cash flow . Tara Lundgren , VP of operations , Aligned Hospitality Management : With an election year on the horizon , there will be widespread speculation about the economy ’ s impact on the hotel industry . With the continued cost increases and
Jack Paul
struggles with employment stabilization , the industry is trying to find an upper hand and determine which areas to attack to stay ahead of the competition and have the best performance . Eric Grosse , CEO , Inspirato : Sustainability will continue to be a hot topic for hotels and can lead to more
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Eric Grosse
creative solutions , where guests and hoteliers work together to reduce the environmental footprint .
HOTELS : What will be the biggest challenge this year for the hotel industry and how can it be overcome ? Gabriel Perez , Sr ., director of lodging operations , Indigo Road Hospitality Group : Our primary challenges will be rooted in the realm of human factors rather than technological hurdles . While some companies may outperform others , those destined for success are the ones that recognize the irreplaceable value of genuine hospitality . Given the current robust economy , which continues to impress
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Gabriel Perez |
despite prevailing inflation , the historic low in the average unemployment rate presents two distinct challenges for our industry . First , the scarcity of qualified talent emerges as a critical issue . Second , a mere 2 % or 3 % unemployment rate means a surplus of individuals in the labor force who may not be well-suited for employment , especially in hospitality . This imbalance results in inconsistencies , service lapses , unfavorable reviews and high turnover . Andrew Ladd , corporate director of marketing and e-commerce , Noble House Hotels & Resorts : The ongoing challenges to hotel profitability are multifaceted and intricate . The surge in costs associated with goods and labor represents a formidable hurdle for the hospitality industry . Ranging from linens to toiletries , these significantly strain operational budgets . The inflationary pressures on raw materials , coupled with supply chain disruptions , have led to increased procurement costs , impacting profit margins for hotels . Ultimately , the path to sustaining profitability demands a delicate balance of cost management , operational innovation and a customercentric approach . Greg Juceam , ESA : When cash flow is challenged , hotel investors become hyperfocused on operational execution . Hotels with superior management teams tend to shine , on a relative basis , in terms of tactical execution on |
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8 hotelsmag . com Jan / Feb 2024 |