From left : Ryan Meliker , president and co-founder of LARC ; Amanda Hite , president and CEO of STR ; Michael Grove , COO of HotStats ; Cindy Estis Green , co-founder and CEO of Kalibri Labs ; and panel moderator Leeny Oberg , CFO and EVP , business operations of Marriott International .
their forecasts up to reflect a brighter light at the end of the tunnel . However , it doesn ’ t mean they will be spot on and it will still be bumpy getting there .
According to Amanda Hite , president and CEO of STR , the first quarter of 2023 will be the strongest of the year , but expectations of a GDP decline in Q2 and Q3 could throw a wrench in hotel demand . She noted a slowdown in average daily rate , which held steady during the pandemic , in the second half of the year .
According to Hite , a 1-point decline in GDP equals 4 points of hotel demand decline .
Despite what STR referred to as a “ looming recession ,” it predicts year-overyear rising RevPAR , up 3.7 % in 2023 and 6.6 % in 2024 . However , real RevPAR indexed to 2019 will still be negative through 2024 until 2025 , when it turns positive .
On the bottom line , STR predicted a 2.5 % growth rate . “ Increased expenses will pressure profits ,” Hite said .
By segment , luxury , according to STR , has the most room to come back . “ We don ’ t expect a slowdown there ,” Hite said . “ Travelers there aren ’ t as impacted by inflation . The expectation is to maintain demand and rate .”
By segment , STR predicted that the upper-upscale segment will have the biggest gain at 8.9 % in 2023 , while the economy segment will end up 2023 with negative RevPAR , down 0.2 percent .
For hotel owners , the next 12 months out are favorable , Hite suggested . “ Supply growth is working in your favor ,” she said , noting it at 1.2 % growth in 2023 , which is below historical levels .
CUSTOMER CADENCE Kalibri Labs measures , among other things , the cost of customer acquisition through guest folio data . Cindy Estis Green , cofounder and CEO , noted the legacy costs that are passed onto hotel owners to fill beds , whether from the OTAs or other intermediaries , which can be as high as 20 % or more . “ All revenue is not created equally ,” Estis Green said .
The good news , she said , is that brand . com is exceeding the OTAs in the distribution game . She noted the Monday through Wednesday business coming through brand . com , calling it a “ greater strength to hotels .”
Still , there is continued worry on the bounce back of corporate transient travel , which still has not popped back , as larger companies hold back or recalibrate how their employees take to the road . Estis Green said that most of the corporate business that is coming through is the unmanaged , smaller and medium accounts
— not the global , Fortune 500 behemoths .
Changing travel patterns are having an impact on even the way deals and projects pencil out . “ You have to understand demand when you are underwriting ,” Estis Green said , adding that , in this environment , brands and loyalty matter . “ It ’ s meaningful ,” she said . “ How much is driven by it ?
BELOW THE LINE Michael Grove , COO of HotStats , a profitability data-driven firm , made the case that hotels will potentially come out of the last few years healthier and leaner , as owners and operators pay better attention to cost lines .
“ Full-service hotels absorbed operational headwinds ,” he said , “ by stripping out some of the costs , especially fixed .” He said that full-service hotels are moving closer to a limited-service model in order to increase margins .
Hotels are known as a good hedge against inflation because room rates can be reset daily , if not hourly . Problem is , as Grove pointed out , is that “ wage rates and other costs don ’ t .”
He noted that on a per-occupied-basis , utility costs remain up . “ The way we operate hotels to maintain margins has to change ,” he said . “ We can ’ t just ride on RevPAR .”
Meanwhile , Ryan Meliker , president and co-founder of LARC , a data consultancy focused on real estate and lodging companies , said he has built a “ mild ” recession into his model . He noted the extent to which corporate transient business has been impacted and though leisure travel has helped to blunt the effect , it , he said , will moderate in 2023 .
On the rate side , he said that ADR is currently being driven by group demand and inflation .
On the investment side , he expected cap rates to moderately expand this year , before a period of compression in 2024 for some asset classes .
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