The 45th Annual NYU International Hospitality Industry Investment Conference has just concluded, and Aperture Hotels CEO Charles Oswald is back with thirteen key takeaways from this year's meeting of hotel owners, investors, and operators.
The US economy is more resilient than we thought, and lodging fundamentals are strong.
The consensus is that the second half of 2023 may experience mild inflation as the Fed engineers its “soft landing” but that the hotel industry will realize RevPAR growth even through softening economic conditions.
54% of all hotel debt matures by the end of 2024.
$540B in hotel debt is coming due in 2023, with another $320B due in 2024. The delinquency rate is flattening below 5% vs. 20% at peak COVID. This includes all lender types (CMBS, LifeCo., GSE, banks, investor, etc.). Roughly 30% of all CMBS loans are stressed.
20% of deals are off-market.
More trades are happening through non-exclusive arrangements.
2023 transaction volume is 50% below 2022.
Capital market conditions are hampering deal pace.
Real RevPAR won’t recover until 2025.
Nominal recovery is one thing, but inflation-adjusted recovery is what matters. 2023 RevPAR growth is front-loaded with big gains vs. Q1 2022 when the Omicron variant still impacted travel. The remainder of 2023 will realize decelerating RevPAR gains.
US outbound travelers have surpassed 2019; inbound traveler recovery is lagging.
Business-friendly destinations like Florida performed well through the pandemic; now, travelers have foreign destination options. Meanwhile, 19 of the top 20 tourist-generating countries are pacing favorably vs. 2022.
Urban upper-upscale occupancies are at 86% of 2019 levels.
New office leasing volume is at 84% of 2019 levels, as sublease availability swells to 227% of 2019. Office leasing continues to track closely with urban upper-upscale hotel occupancies. Recovery is uneven as Miami, Phoenix, and Nashville urban markets post big wins, while San Francisco, Washington DC, and Philadelphia lag well behind.
Group demand is continuing to climb.
Group booking pace continues to recover as meetings and conventions offset shortfalls in business transient demand patterns.
High interest rates are affecting the new supply pipeline.
2023 hotel rooms in planning are down -18% vs. 2022, which could mean favorable occupancy gains in 2025 and beyond.
Higher interest rates are here to stay.
The days of “free money” at 0% interest rates are over but expect to see some spread compression.
Labor challenges continue.
Over 80% of hotels are short-staffed as the industry will sell more rooms in 2023 than in 2019 with fewer employees to service them.
Union activity has accelerated.
There were over 2,500 representation petitions in 2022, which is up 53% vs. 2021. Total case intake was +23%, the most significant increase since 1976.
Lodging is an increasingly attractive investment.
Lodging investment is becoming increasingly attractive as unlevered returns on hospitality investments continue to outperform levered returns of all other real estate asset classes.
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