From left : Oliver Bonke , CEO of Deutsche Hospitality ; Adam J . Goldberg , partner at Boston Consulting Group ; and Sean F . Hennessey clinical associate professor at the Jonathan M . Tisch Center of Hospitality , NYU School of Professional Studies , discuss findings of new survey focused on borrowing costs and industry fundamentals .
NEW YORK — The hotel industry is a study in supply-and-demand dynamics . When less hotels are open in the market and competition is restrained , hotels that are in operation tend to perform better from a demand standpoint , since there are less choices to choose from . This relationship , therefore , should lead to better revenue and better profitability .
A new survey of hotel owners , management companies and other industry stakeholders carried out by The NYU School of Professional Studies Jonathan M . Tisch Center of Hospitality and Boston Consulting Group ( BCG ) elucidates sentiment and prospects for the hospitality industry .
According to the study , more than 70 % of the respondents said demand will at least somewhat rise by the end of this year , while 42 % anticipate significant increases in 2024 . Hoteliers are looking for marginal revenue increases of 4.6 % to 5.1 % this year . Those anticipating a major rise in demand see revenues rising by around 12 %. Actual growth rates are expected to surpass the rate of inflation .
Volume and price are likely to drive revenue increases . Hotel owners expect room rates to increase from 8.3 % to 8.8 % in the next 18 months , increasing gross margins by around 6 percentage points .
The survey resulted in a white paper titled : “ Hotel Borrowing Costs are Rising – But So Are Occupancy Rates .” The paper predicted positive outcomes based on increasing demand that will drive key industry metrics , including occupancy rates , average daily rates and RevPAR , while new construction has come down to 2015 levels . However , there is hesitation among property owners to invest new capital into the sector due to the current economic conditions .
In the past three years , the Tisch Center and BCG have partnered on research on the latest industry challenges and opportunities .
“ We expect this year ’ s report will arm industry stakeholders with valuable information to help move their businesses forward ,” said Sean Hennessey , associate professor at the NYU SPS Tisch Center of Hospitality and contributor to this white paper . “ While inflation increases operating costs , it can also help accelerate room rate growth . Further , interest rates rise in an inflationary environment , which affects the feasibility of new construction . On balance , the profitability outlook is attractive .”
Uncertainty , concerns about inflation and increased interest rates are expected to continue for a while , said Tom McCaleb , managing director and partner at BCG .
“ All can have a chilling effect on hospitality investment . Despite these concerns , our latest work with the Tisch Center shows that strong room demand will keep the hospitality industry an attractive
14 hotelsmag . com Jul / Aug 2023