CONFERENCE REWIND
IN PROPITIOUS COMBO , NEW HOTEL CONSTRUCTION STARTS ARE DOWN , FUNDAMENTALS ARE UP
A NEW SURVEY FROM NYU AND BOSTON CONSULTING GROUP ILLUSTRATES A ROADMAP FOR SUCCESS .
By KATHAKALI NANDI investment for the foreseeable future ,” McCaleb said .
INVESTMENT EXPECTATIONS Although respondents expect the inflation rate to fall below 5 % by the end of 2024 ( it ' s already happening : In June , inflation in the U . S . was down to 4 %, according to the Consumer Price Index ), they are still wary . High-interest rates were a concern among hotel investors , just like other commercial property sectors .
Given the current situation , 82 % of hotel owners considered the hotel industry as less attractive than other investment classes .
The industry is approaching a trigger point , the survey noted . A summary of recent hotel financings revealed spreads topping out at 400 basis points above the secured overnight financing rate , which is close to 5 %. Investors tend to pull back when borrowing costs surpass 8 %. According to the survey , 89 % of hoteliers considered rates higher than 8 % unacceptable for taking out a loan .
Currently , most of the investment in the industry is focused on renovation and brand conversion activity , which is catching up after lax enforcement by the hotel brands during the pandemic .
Renovation and brand conversion projects touched new highs in Q1 2023 ( 1,953 hotels and 253,533 rooms reflecting 38 % and 37 % YOY increases , respectively , according to Lodging Economics ).
LABOR CHALLENGES Filling roles is still tough and the continued staffing crunch has added to investors ’ concerns . About 70 % of hotel owners view the hotel industry as less attractive if labor problems persist . Additionally , over 60 % of respondents said they were somewhat or severely short-staffed , which is estimated to cost hoteliers 7 percentage points of revenue and 2 points of operating margin .
More than 69 % of respondents said they expect to face less attrition by the end of this year , which comes as welcome news . More than 75 % of respondents have witnessed modest or better labor productivity gains in the past three years and are optimistic about improving employment moving forward . Over 60 % expect prolonged improvement this year and all expect significant improvement in 2024 .
There remain two big challenges : a large number of vacancies and a dip in real earning potential for industry workers . Despite employment returning to pre-pandemic levels , job openings in the hospitality sector are still at a record high , fueled by expectations for a major rise in demand .
Industry growth rates in hourly earnings are decelerating , especially for nonsupervisory staff , and are now almost on par with the inflation rate , according to the Bureau of Labor Statistics data on the accommodation and food service industry .
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