By DAVID EISEN
LOS ANGELES — Eighties British synth pop star Howard Jones ran off a bunch of top 10 hits . One , “ Things Can Only Get Better ,” reached number five in the U . S . on the Billboard Hot 100 chart in 1985 . The music video ( back in the 1980s , music videos mattered ) is a melodic mishmash : a road crew setting up for a concert , Jones singing at the concert and , in a couple of spasmodic cuts , Charlie Chaplin and “ Karate Kid ” cosplay . It was the 80s .
Almost four decades later , things can only get better for the hotel industry — not that they are so bad right now .
At the Americas Lodging Investment Summit , the C-suite checked in with how they see things shaping up for the rest of the year . And like Jones , they seem to be , in large part , on the same page : things can , and will , get better .
Julie Arrowsmith , president and CEO of G6 Hospitality , which operates in the economy segment with two brands , Motel 6 and Studio 6 , said the economy segment was “ hit hard ” in 2023 , noting negative RevPAR and a shrinkage in supply . She said the economy segment is very much impacted by inflation that has impacted how travelers spend . “ We saw shifts in traveler behavior ,” Arrowsmith said .
The silver lining is that 2024 , according to Arrowsmith , will be better for the economy segment . “ Travel will continue to increase ,” she said .
It should also be better for the entire hotel industry , too . Last year was no easy market to navigate : Though operating fundamentals remained strong , investing in the hotel space was tricky due to higher interest rates that have kept transactions volumes at bay .
“ 2024 will be a better year for the economy ,” said Michael Lipson , CEO and chairman of Access Point Financial , a direct lender for hotels . “ There is a tremendous amount of capital out there and they are not putting it into office and multifamily . Hotels are a tremendous place .”
He added that the spread for hotels had not significantly changed and predicted that spreads won ’ t tighten too much “ because they never widened .”
2023 was a bumpy year for Margaritaville and its CEO , John Cohlan . He called 2023 “ good ,” but what he didn ’ t talk about was his New York hotel , Margaritaville Times Square Resort , which saw its owner , Soho Properties , file for bankruptcy . Arden Group , which had originally provided a $ 57-million mezzanine loan for the hotel , picked it up at auction .
Cohlan said that 60 % of Margaritaville ’ s business is new builds , but that the cost of debt has delayed new projects . The key word being cost , because , according to Cohlan , “ it ’ s not the availability of debt , it ’ s the cost of it .”
DEALS DELAY In broad context , 2023 was a bumpy year for real estate on whole , said Jim Merkel , CEO and co-founder of Rockbridge . There were many converging events , he said , inflation being one and , somewhat surprisingly , COVID — still . Lower transaction volumes , he said , were a given , given that interest rates have shot up some 550 basis points combined with a quiet CMBS market , while owners battled with increased pressure on margins . He called 2023 “ one of the harder years in memory ,” but that a brighter year was ahead , “ the beginning of good times ,” as he referred to it . “ When rates come down , and forward visibility clears , transaction volumes will pick up .”
Merkel isn ’ t the only one bullish on a headier 2024 transactions market . Kevin Davis , Americas CEO , JLL Hotels & Hospitality , said volumes will pick up in 2024 and that a potential rate cut coming in March might be further fuel for the fire , but that a hold on interest rates does just as good . “ It ’ s signaling ,” he said .
At the end of January , the Federal Reserve , having not attained its 2 % inflation goal , decided to hold rates steady , in a range between 5.25 % -5.5 %, the highest in nearly 23 years . As of the end of December , the inflation rate stood at 3.35 %.
“ Over the past 18 months , we ’ ve been battling inflation ,” Davis said . “ The math today is largely the same . It ’ s still an elevated interest rate environment .” And though even a 50-basis-point deduction would help , “ it won ’ t be enough to turn the spigot on ,” Davis said . “ It starts slowly .”
When it does , don ’ t think there will be discounted deals . “ There is a difference between distressed and depressed ,” Lipson said . “ There are not as many as the former out there . You won ’ t be buying for 50 cents on the dollar .”
Mar / Apr 2024 hotelsmag . com 11